Do sole traders need to make KiwiSaver contributions? No, you don't need to, legally – but there are a lot of reasons why you should.
In this guide, you'll find out what you need to know about KiwiSaver as a sole trader, and how to get the best value from the scheme.
What is KiwiSaver?
KiwiSaver is a retirement-savings scheme set up by the government. Because you can only access your savings under certain circumstances, when you reach 65, you'll have a nest egg to retire with.
If you're employed, you opt in to contribute part of your salary — at least 3%, up to 10%. Your employer is obliged to put 3% into KiwiSaver too, and can opt to put in extra. The NZ government will also match 50% of your contributions up to $521.43 every year. If you work for yourself, you can still get that government contribution, but you won't have an employer adding money too.
Anyone with a KiwiSaver fund is essentially an investor. A KiwiSaver provider will invest your savings for you so you get the best returns and grow your savings.
Do you need to pay into a KiwiSaver fund if you're self-employed?
You don't need to pay into a KiwiSaver fund if you're self-employed, but you probably should. On top of saving your money, government contributions help grow your savings, and you may be eligible for a $10,000 Homestart Grant when you buy your first home. Because KiwiSaver funds also invest your money for you, you're likely to earn even more in investment returns.
Why make KiwiSaver contributions?
Making KiwiSaver contributions is a smart way to save and invest for your retirement, and might benefit you in other ways too.
Save for retirement
Saving for retirement is the main purpose of the KiwiSaver scheme. When you turn 65, you can use your savings however you like.
First-home buyer benefits
First-home buyers benefit from KiwiSaver too. Because getting on the property ladder is a great way to set yourself up for retirement, you may be allowed to use some of your savings to put towards a deposit on your first home.
Government contributions
Government contributions are another great reason to make KiwiSaver contributions, even if you're a sole trader. If you put in at least $1,042.86 each year, you'll get the maximum government contribution of $521.43.
How much should you contribute to your KiwiSaver?
How much you should contribute to your KiwiSaver depends on your income and your overall savings goals. It's a good idea to contribute at least $1,042.86 each year so you can receive the maximum government contribution.
How to pay into your KiwiSaver
Paying into KiwiSaver is simple, but you'll need to do some setting up, choose your KiwiSaver provider and decide how much to contribute.
Research to find a KiwiSaver provider and fund you like
Researching and finding a KiwiSaver provider and fund you like is the first step. This is the company you put in charge of looking after and investing your savings. When choosing, you should consider each company's fees, track record, services and what it will and won't invest in. This tool can help you compare and select a KiwiSaver fund.
Figure out what you would like to contribute and how often
Figuring out what you'd like to contribute, and how often, can feel a bit complicated. This tool can help you decide based on your savings goals, how much you earn, how much you can spare and what other investments you have.
Set up recurring payments or make manual lump sum payments
Set up recurring payments or make manual lump-sum payments direct to your KiwiSaver provider, through the IRD, or via your online banking platform.
Sole trader KiwiSaver FAQs
Do sole traders need to pay KiwiSaver to subcontractors?
Sole traders do not need to pay KiwiSaver to subcontractors.
How much tax do you pay on KiwiSaver?
How much tax you pay on your KiwiSaver earnings depends on your KiwiSaver scheme, but in most cases, you'll pay 28% on your investment earnings.
Is there a cap on how much you can contribute to your KiwiSaver?
No, there isn't a cap on how much you can contribute to your KiwiSaver.
Can I withdraw money from my KiwiSaver?
You can only withdraw money from your KiwiSaver when you turn 65. However, you may be able to get money out if you are:
Buying your first home
Moving out of New Zealand permanently
Experiencing significant financial hardship or a serious health condition
Money for free? Why not?
From invoicing to GST, there’s already so much for a sole trader to think about, but it makes a lot of sense to think about KiwiSaver too. Pay into your account bit by bit and grow your savings. Then, with your savings, plus investment earnings and government contributions, you'll be surprised at how quickly your account will grow.
To contribute to your account, set one up with a KiwiSaver provider and fund, then log into your online banking to make a deposit. With accounting software designed for sole traders, it's easier than you think to manage your finances, so you can keep contributing to your KiwiSaver.
Disclaimer: Information provided in this article is of a general nature and does not consider your personal situation. It does not constitute legal, financial, or other professional advice and should not be relied upon as a statement of law, policy or advice. You should consider whether this information is appropriate to your needs and, if necessary, seek independent advice. This information is only accurate at the time of publication. Although every effort has been made to verify the accuracy of the information contained on this webpage, MYOB disclaims, to the extent permitted by law, all liability for the information contained on this webpage or any loss or damage suffered by any person directly or indirectly through relying on this information.