If you’re on the path to Financial Independence, you’re probably a little bit exasperated that most of the material out there on the interwebs is American. I love listening to the ChooseFI podcast as much as the next person. But I end up skipping through large chunks of episodes where they talk about 401ks and college hacks. Those things just don’t apply here.
So what are our kiwi quirks we can leverage to our advantage when planning for financial independence (and possibly early retirement) here in good old New Zealand?
It goes without saying, you have to be in KiwiSaver. Don’t believe anyone who tries to tell you otherwise. You can beat the return of free money from your employer and the Government.
No Capital Gains Taxes
Well that’s not entirely true. If you buy and sell a house within five years you need to be able to prove it was your family home, otherwise you’ll have a tax liability. And I’m not personally convinced that this particular quirk is actually a positive. But if you’re of the real estate persuasion, a lack of capital gains taxes is a plus for you.
It’s easy to forget that “early retirement” also contains “normal retirement” (imagine your own Venn diagram here if you wish). Here in NZ we like to complain about how hard it is to survive on just a pension. If you’re aiming for financial independence you’re not going to have to survive just on a pension and any superannuation you receive is going to be a bonus that reduces the amount you need to save to reach your “number”, allowing you to retire sooner. In this context you’ll find that NZ Super is more than generous.
Super Gold Card
Continuing the “normal retirement within early retirement” theme, once you turn 65 you get free off-peak travel on public transport. I can’t see it being politically viable to drop this perk any time soon, so you can probably count on having reduced transport expenses when you hit that age.
Working For Families
Back to the other end of life, there is government support for families with children, provided your income is below a certain level and you work at least 30 hours a week. I was amazed to discover recently that some people refuse to sign up for Working For Families because they’re essentially too proud to. Apparently in their mind it somehow equates to being a “bludger” on the taxpayer. It’s important to remember that the majority of Kiwis are “net tax beneficiaries”, i.e. they will receive more $$$ from the Government in their lifetime by the way of healthcare, education, pensions, use of roads, tax credits, student allowances, public transport subsidies etc. than they ever pay in taxes. So if you’re concerned about bludging off the taxpayer, don’t be! You are the taxpayer and you’ll be in the majority 🙂
Rebates on Donations
If you make charitable donations (and I strongly advise that you do, we need our charities), the Government will refund you a third of any donations you make each tax year. Pretty cool eh? It’s only up to a point, e.g. you can’t donate $1,000,000 and expect to get $333,333 back. The scheme doesn’t go that high. But for your average person it’s a pretty cool incentive to at least be a little bit generous and know you’re not taking as big a hit to the back pocket as it feels like at the time.
I’m sure there are plenty more unique NZ finance tips that I haven’t covered off here. What are yours?
Comment Policy: For this blog, I’ve implemented a Comment with Kindness policy. You can read more about it here, but the gist of it is: Follow what I call the “Grandma Rule”. If you wouldn’t take that tone with your grandma, your comment probably won’t make it through moderation.