New Zealand residents with foreign retirement savings
have been granted extra time to transfer them to New Zealand
schemes to avoid hefty tax bills.
Deloitte Dunedin associate tax director Phil Stevenson said
the extensions were a big win for many taxpayers who were
unsure if they could receive their pension transfers before
the April 1 cut-off date.
Revenue Minister Todd McClay announced key changes to the
Taxation (Annual Rates, Foreign Superannuation and Remedial
Matters) Bill which sets out simplified new tax rules on
overseas superannuation schemes.
Much of the Bill dealt with the estimated 70% of New Zealand
residents with overseas superannuation schemes who had not
been paying the right amount of tax, or indeed any tax, when
they transferred that cash to a New Zealand scheme or
withdrew a lump sum.
Under the new legislation, from April 1 this year, lump sums
from foreign superannuation schemes would be taxed only when
they are withdrawn or transferred to a New Zealand or
The tax would depend on the investment returns made while the
person was a New Zealand resident.
Mr Stevenson said the change allowed people to have certainty
about the tax treatment of the transfer or withdrawal. That
was a major simplification over the existing regime which saw
investment gains taxed under foreign investment fund rules.
''We have seen examples where the difference between the
amount to return under the concession and the new rules can
The concession would benefit people who had been New Zealand
tax residents for more than seven years because they would
return lower taxable income if they applied the concession
compared with applying the new rules, he said.
People who had complied with those rules would still have the
option of paying tax under them when the new regime comes
into effect in April next year.
The concession was a pragmatic approach to deal with historic
non-compliance due to a lack of awareness of the rules,
particularly on UK-based pensions which had been subject to
the foreign investment fund rules since 2006, Mr Stevenson
Applying the concession would result in significant penalty
and interest savings for people who did not comply with their
obligations in prior years.
''The flip side is there is an increased risk of IRD activity
for those taxpayers who made withdrawals previously and do
not apply the concession,'' he said.
Forsyth Barr investment adviser Gordon Tucker said the time
frame to complete a UK pension transfer into a KiwiSaver
scheme could vary widely from one months to seven months.
''This is due to a number of factors but normally include the
time the KiwiSaver member takes to provide key pieces of
documentation to their KiwiSaver provider.''
Time zones varied, so contact between KiwiSaver and UK
administrators was limited to email and mail and any problems
took longer to resolve, he said.
The processing speed of the UK providers could vary between
very fast and extremely slow and if the UK provided the
transfer payment by cheque, that could take three to four
weeks to clear.
''Given the deadline to start a UK pension transfer under the
new regulatory framework is March 31, 2014, it is important
for those considering making a transfer to take action
soon,'' Mr Tucker said.