How does Kiwisaver work for Startups?

Kiwisaver in New Zealand has been around since July 2007.  If you’ve worked for a company its likely you’ve been auto enrolled in the scheme, and been contributing 3, 4 or 8% of your gross pay to your provider (through the IRD).


In this post we’re going to look at:

  • Will you be automatically enrolled if you start a company?
  • Do Founders get the same benefits as an Employee?
  • What is a member tax credit?
  • How do you pay Kiwisaver if you are a founder?


What we’re not going to cover in this post

  • Whether you can use your Kiwisaver to fund your startup
  • Whether you should join Kiwisaver
  • Which are the best Kiwisaver funds
  • Why the Government keeps removing the benefits of joining and participating in Kiwisaver


What’s Automatic Enrolment?  Does it happen when I register my Company?

You are automatically enrolled when you join a company as an employee,  but there's no such process when you start a company. 

This is related to the fact you are on two different tax systems in New Zealand, as an employee you will pay tax (and Kiwisaver) through the PAYE regime.  Your employer will deduct tax and kiwisaver from your pay and forward it to the IRD each month.  

A Company Founder will likely be paying tax under the Provisional Tax regime, which won’t take Kiwisaver into account.  You’ll typically be treated as a “Shareholder Employee” and be paid out of Net Profits at the end of the year.


Do Founders get the same benefits as an Employee?

The answer is Yes, but to get there we need to debunk two myths and make one “if” statement.

If enrolled in Kiwisaver (and not on a contributions holiday) Employees will pay 3%, 4% or 8% of their Gross Pay to their Kiwisaver provider each pay.  Their Employers will also make a minimum contribution of 3% towards the Employee’s Kiwisaver scheme.  Myth busting time:

Myth #1 - The contribution Employees make to Kiwisaver is tax-free

Myth #2 - The contribution Employers make to Kiwisaver is tax-free

While the Employee’s contribution is a % of Gross income, it only gets paid out of after tax income due to them.   The Employer contribution is also subject to ESCT, which is a tax, and ensures you lose between 17.5% and 33% of the amount destined for your Kiwisaver dream.

Here’s the “If” statement, a Founder will get the same benefit as Employees IF you make a voluntary contribution over a certain amount each year.

So if the Kickstart $1,000 is gone, what are the benefits of Kiwisaver?


The Member Tax Credit

Everyone in Kiwisaver gets a Member Tax Credit of $523 paid to your Kiwisaver fund, if you contribute $1,043 or more in the year.  The contributions can include payments from your old work, or voluntary contributions, so long as the fall between 1 July and 30 June. Your Kiwisaver provider will calculate this for you, and notify the IRD to pay this tax credit to your account once a year (usually in July or August).


How do Founders pay Kiwisaver?

Well you can turn yourself into an Employee, and pay yourself through the PAYE scheme.  Talk to us if you'd like to look at this option.

Or you can make a voluntary contribution each year to your Kiwisaver provider.  Because they will calculate your entitlement to the Member Tax Credit, you can either pay them directly or through the IRD.

  • Pay Direct - speak with your provider to find their details.  Make sure to check their fees as there may be some minimum amounts you’ll need to transfer
  • Pay the IRD through Internet Banking - Choose the “Pay Tax” option and include:
    • your IRD number
    • tax type “KSS"
    • period 0


So overall, if you’re a Kiwisaver and you've started a company, pay the $1,043 each year, and you’ll get $521 topped up to your Kiwisaver fund.


Other stuff you might be interested in:


Note: You’re going to want to contact a financial advisor for independent advice on your own personal finances, whether Kiwisaver is right for you, or how you choose an investment product.  We aren’t those kinds of people, sorry!

Disclaimer: Information provided to the best of the authors knowledge at time of publication.  Laws are subject to change and independent advice should be sought before considering an investment decision.  The above information is general in nature and should not be construed or relied on as a recommendation to invest in Kiwisaver, or not to invest in Kiwisaver