Legislation allowing New Zealanders returning home from Australia to bring their retirement savings with them will be introduced to Parliament in about two weeks, Finance Minister Bill English says.
Providing the necessary law changes are made in Australia, it is envisaged the new arrangements will take effect in the second half of next year.
“This is an important step forward for our wider Single Economic Market programme with Australia, particularly in helping the free movement of labour between the two countries,” Mr English says.
“In particular, it will allow New Zealanders and Australians to consolidate their financial affairs in the country in which they live.”
Currently, Kiwis who work in Australia must contribute to an Australian complying superannuation fund. However, the savings are locked into the Australian scheme until the saver reaches retirement age.
Mr English signed an agreement with Australian Treasurer Wayne Swan in July, which paved the way for the new super portability scheme.
It will allow retirement savings from certain Australian superannuation funds to be transferred into New Zealand KiwSaver funds – and vice versa. New Zealanders bringing their savings home must put them into a KiwiSaver fund.
Australia’s Tax Office has estimated that it holds about A$13 billion (NZ$16.6 billion) in “lost accounts” in the Australian superannuation system.
“We expect that much of this money could belong to New Zealanders who have returned home and these new rules will allow these funds to be brought back to New Zealand,” Mr English says.
Participation in the super portability scheme will be voluntary.
The Government will include the changes in the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver and Remedial Matters) Bill, expected to be introduced to Parliament in mid November. Key facts about the Super portability changes
The transfer of retirement savings between the two countries will be exempt from entry and exit taxes. Under current tax laws, transferring savings from Australia to New Zealand may be regarded as a taxable dividend. The proposed legislation will ensure this does not happen.
KiwiSaver members moving from New Zealand to Australia will be able to retain any member tax credits if they transfer to an Australian scheme.
KiwiSaver members will not be able to withdraw money transferred from Australia to help them buy their first home, but they can use the interest earned on those savings for this purpose.
Retirement savings transferred from Australia into a New Zealand KiwiSaver scheme can be withdrawn when members reach the age of 60 as long as they have retired – as set out under Australian scheme rules. KiwiSaver savings transferred to Australian schemes can be withdrawn when members reach 65 – as per New Zealand KiwiSaver rules.
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