Do you have super in the UK or USA? Or have you brought it back since 1st January 2000?

At first glance the legislation looks complicated and oppressive.  But when it is worked through it is not that bad.  I have summarised the main points below.  If you require personalised advice, contact me on carey@moneyworks.co.nz. (please note that a fee may apply.)  Please note that Moneyworks are financial planners and not taxation experts and this is a brief summary and not a definitive explanation of how this taxation works.  More detailed documents are linked at the bottom of this post.

1. If you transfer your overseas superannuation within FOUR years of becoming a NZ resident or returning to NZ  you are exempt from taxation.

2. If you have transferred any non Australian superannuation into a NZ KiwiSaver or QROPs scheme since the start of 2000 and you had been living in NZ for more than four years, you have a tax liability.

3. If you still have overseas super, when you bring it back to NZ you have a tax liability.  If you bring it back to NZ before 31/03/2014 you have a tax liability on 15% of the amount that you bring back.

4. If you have been declaring this superannuation under the FIF tax regime previously, you can continue to be taxed under this regime.

5. For all others, your super will be taxed as income, based on how long you have been resident in New Zealand, and what your marginal tax rate is in the yea that you bring it back to New Zealand.

6. If you transfer to a KiwiSaver scheme, the legislation has been changed so that you can pay your tax bill out of the funds in your KiwiSaver scheme.  However, if you withdraw funds out of your KiwiSaver to pay the tax bill, this is likely to also trigger a tax bill in the UK of 55% on the amount withdrawn.  Therefore, it is possibly best to find funds from other sources to pay the tax liability.

If you can do this before 31 March 2014 you are taxed on 15% on the value of the investment.  However, this might not be the best option for you, depending on how long you have lived in NZ and what your marginal tax rate is. Some overseas pensions have penalties for moving them before they are 'due'. It is important that you weigh up all the aspects of bringing your funds back urgently or in a timely manner.

For some people it might be worth leaving the funds in the country of origin.  Other relevant points to note:

1. Not all KiwiSaver schemes will accept your transfer from the UK.  The fund has to be 'QROPs' compliant.  Therefore, to bring your funds back to NZ, you may have to change your KiwiSaver provider.

2. The process of transferring funds is slow and tedious - with a lot of paperwork required.  Therefore, it you have decided that you wish to bring the funds back by 31 March 2014, you need to get onto it NOW.

3. There may be a fee involved if you work with a financial adviser to assist you with this process. However, a good financial adviser will be able to help you work through how the legislation works, but remember they will not necessarily be a 'tax adviser'.

For more information on the proportion that will be taxed and an article by Diana Clement see this blog article:

Overseas foreign superannuation and the IRD

Additional documents for your reference:

Tax treatment of foreign superannuation _ Policy Advice Division, Inland Revenue

Taxation Annual Rates Foreign Superannuation and Remedial Matters Bill

If you require personalised advice, contact me on carey@moneyworks.co.nz. (please note that a fee may apply.)  Please note that Moneyworks are financial planners and not taxation experts and this is a brief summary and not a definitive explanation of how this taxation works

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