Most of us are familiar with the perks of KiwiSaver. If you are a PAYE employee, your employer will usually contribute to your savings. The money is taken from your pay before you have a chance to spend it. You have access to a range of funds that can be used to tailor your investments to your risk profile. .

But what about the government contribution?

Here’s what you need to know about that part of the equation.

What is the government contribution?

The government contribution to KiwiSaver, sometimes also referred to as the member tax credit, is a subsidy for qualifying contributing KiwiSaver members.

Each year, the government will contribute 50c per $1 invested by a KiwiSaver member in the previous 12 months, up to a maximum government contribution of $521.43 for those who have contributed at least $1042.86. Even if you don’t contribute the full $1042.86, if you qualify for the Government subsidy, you will still get 50c for every dollar you contribute, up to the maximum contribution available.

The KiwiSaver year runs from July 1 to June 30.

Who can get it?

KiwiSaver members who contribute at least enough money automatically qualify for the contribution, provided they are aged at least 18 and less than 65. Members also need to be mainly living in New Zealand to qualify.

You can contribute in small amounts through the year or in a lump sum all at once at the end of the KiwiSaver year.

Payments can have been made via your salary, or through payments to Inland Revenue or your scheme provider directly. As long as $1042.86 has been contributed within the 12 months to June 30, you will qualify for the contribution.

Money that is contributed from an employer, or by moving funds from Australian retirement schemes, does not count towards the $1042.86 member contribution required to get the full $521.43.

How much is $1042.86?

If you earn at least $35,000 a year in salary or wages and contribute 3% to your KiwiSaver, you’ll usually have contributed enough in a year to have hit that target.

It is usually people who are not regularly contributing, perhaps because they are off work, have paused their contributions, or who are self-employed, who need to check that they are contributing at least the equivalent of $20.05 a week to claim the full government contribution.

It can be a good idea to add to your diary to check this each year at the start of June and make a top-up payment if required. Remember to allow enough time for any voluntary contributions to be credited to your KiwiSaver account. We would recommend making any top-up payments at least two weeks before 30 June to be on the safe side.

Partial contribution

If you turn 18 part-way through the year, or reach 65, the contribution will be calculated based on the number of days you qualify to receive the contribution. This also applies to people who are returning to New Zealand after time overseas.

Why does it matter?

Many New Zealanders still do not contribute enough to their KiwiSaver schemes to qualify. It has previously been estimated that these non-contributing KiwiSaver members had missed out on a combined more than $1 billion in their KiwiSaver funds because they had not saved enough to get the $521.43.

Ready to talk?

If you’d like to check whether your KiwiSaver investment is delivering as much as it could be, drop us a line. We can help you work through your fund choice and provider choice as well as your level of contributions and check you’re on track for your goals.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.