Cullen supports workplace super in the Budget
A new superannuation tax regime will be introduced from April 2004 - whatever it turns out to be.
Minister of Finance Michael Cullen earlier this afternoon outlined two clear options under consideration to encourage employer-based superannuation schemes.
Those options are:
- matching the withholding tax paid by employers to the statutory marginal tax rate paid by the worker; or
- extending the 6% concessional rate now enjoyed by those earning over $60,000 a year to all income earners.
"The government has concluded that employment-based superannuation schemes offer the greatest potential to encourage savings behaviour with the least risk to the revenue," Dr Cullen said.
Employers’ contributions are now generally taxed at 33% irrespective of the employee’s individual tax rate.
On the government’s pre-funded superannuation scheme, a further $1.2 billion was allocated, as well foreshadowed. The fund is scheduled to reach $8.9 billion by the 2005-06 financial year.
Dr Cullen said the fund would by 2009 balance out the government’s gross debt, which is still set to stay within 30% of GDP.
Meanwhile the Retirement Commissioner – who many hoped would receive a funding boost in order to help lift New Zealand’s level of financial literacy – has received slightly less funding than it received last year.
Elsewhere for the financial services industry, the Securities Commission gets a boost, although perhaps not as much as it would have liked – only $7.7 million, and that is spread over four years.
And on tax, Dr Cullen said the government is still considering some recommendations of the McLeod Tax Review.
These include the introduction of a time limited tax exemption or new migrants based on income sourced form overseas; and the risk free rate of return method (RFRM) for offshore equity investments.
Earlier there had been strong hints that a clear steer would be given on the government’s intentions for RFRM, but it is understood that Cabinet – especially Prime Minister Helen Clark – baulked at even talking of a new tax this close to an election.
