KiwiSaver employer contributions above the new minimum level set by the Government will be taxed, under changes to the retirement scheme going through Parliament.
The Government's tax legislation, which passed its first reading by 68 votes to 50 on Monday, includes changes to the KiwiSaver scheme.
It drops the minimum contribution rate for employees from 4% to 2% and caps compulsory employer contributions at 2%.
Anyone in the scheme will also be able get the maximum tax credit of $1040, irrespective of their income.
Under the current scheme, employer contributions are exempt from the employer superannuation contribution tax - set by Inland Revenue at 33% or 39%.
Finance Minister Bill English said employers who choose to contribute 4% to their workers KiwiSaver accounts would pay the tax on 2% of that money.
Mr English said the policy was not new. "I spoke all around the country, made it quite clear what the policy was," he said. "It won't be a surprise to anybody."
Labour Party leader Phil Goff said voters did not understand the fine print of National's policy, which he described as a con job.
The Government says its changes will make KiwiSaver more affordable and enduring.