Taxes on fees

Most funds charge a fixed dollar amount per month and then several other fees as percentages of the gross or net asset value of your account. Some include GST and others don't. Net, gross, GST? So it appears that tax is a factor in how much we pay in fees.

We asked IRD what taxes applied to the various fees that KiwiSaver funds charged.

IRD told us the Ministry of Economic Development was responsible for that area of KiwiSaver. But the Ministry of Economic Development told us no, it was indeed IRD that was responsible. With IRD now agreeing to answer the question, we plodded on.

IRD's initial investigation bore no fruit so it was referred to its "experts". A month of expert analysis later and we were told that "we still can't get any answers; no-one at this stage is willing to commit to answering that question".

We asked IRD: "If you don't know how taxation applies to the fees then who does?"

Finally ... an answer

IRD finally told us that GST wasn't charged to individual members and the only other tax is Investment Tax - 19.5 percent or 30 percent depending on your financial situation. It took IRD more than three months to figure this out.

However, the investment statement for Fisher Funds Growth KiwiSaver Scheme says "plus GST" under custodial and other administration fees but says "no GST is currently payable" under the Trustee's annual fee. It's little wonder that investment statements are peppered with statements such as "if applicable". If IRD doesn't know, how are fund managers supposed to?

Robert Oddy, Managing Director of International Financial Planners Limited, says there's huge confusion surrounding KiwiSaver and he's concerned at the lack of financial education. "When you see some of the packs sent out by providers, there's absolutely no information that can help people. It's very hit and miss." He admits that in the absence of getting enough information from providers, it's difficult for advisers to say which scheme it's better to go with.