Introduction
Understanding Trans-Tasman Retirement Savings transfers is crucial in the context of Australian tax for several reasons:
1. Portability of Retirement Savings: The Trans-Tasman Retirement Savings Portability scheme allows individuals to transfer their retirement savings between Australia and New Zealand when they move from one country to the other. This makes it easier for people to consolidate their retirement savings in one place, reducing the risk of lost or unclaimed retirement savings.
2. Tax Implications: Transfers between New Zealand and Australia are exempt from entry or exit taxes. This means that transferring retirement savings across the Tasman should not lead to an unnecessary loss in value of those savings.
3. Regulatory Compliance: Understanding the rules and regulations of the Trans-Tasman Retirement Savings Portability scheme is crucial for compliance. Only complying super funds that are regulated by the Australian Prudential Regulation Authority (APRA) and New Zealand KiwiSaver scheme providers can participate in these transfers.
4. Financial Planning: For individuals who have worked in both Australia and New Zealand, understanding this scheme is important for financial planning and maximizing their retirement savings.
5. Impact on Government Benefits: Any savings transferred to an Australian super fund are not deductible as a personal contribution. Transfers are not eligible personal contributions for the purpose of receiving the super co-contribution for low-income earners. Transfers are also not eligible for a spouse contribution tax offset.
Given the potential tax benefits and the impact on an individual’s retirement savings, it’s crucial for individuals moving between Australia and New Zealand to understand the Trans-Tasman Retirement Savings Portability scheme.
Understanding Trans-Tasman Retirement Savings Portability Scheme
The Trans-Tasman Retirement Savings Portability scheme is a mutual arrangement between Australia and New Zealand that allows individuals to transfer their retirement savings between the two countries when they move from one country to the other.
The main purposes of this scheme are:
1. Portability: The scheme allows for the portability of retirement savings across the Tasman Sea, making it easier for people to consolidate their retirement savings when they move between Australia and New Zealand.
2. Labour Mobility: The scheme is intended to improve labour mobility between the two countries. By allowing individuals to carry their retirement savings with them, it removes a potential barrier to moving between Australia and New Zealand.
3. Lost or Unclaimed Retirement Savings: The scheme also makes it easier for people to transfer any lost or unclaimed retirement savings from Australia to New Zealand. This can help ensure that individuals do not lose track of their retirement savings when they move countries.
The scheme is voluntary for both members and Australian super funds and New Zealand KiwiSaver scheme providers. Only complying super funds that are regulated by the Australian Prudential Regulation Authority (APRA) and New Zealand KiwiSaver scheme providers can participate in these transfers.
Please note that the information provided here is of a general nature and may not apply to your specific circumstances. Always consult with a professional for personalized advice.
Australia and New Zealand share a goal of enhancing the portability of retirement savings for individuals moving between the two countries. This is part of their broader commitment to creating a seamless trans-Tasman labour market.
The Trans-Tasman Retirement Savings Portability scheme allows individuals to transfer their retirement savings between Australia and New Zealand when they move from one country to the other. The scheme is voluntary for both members and Australian super funds and New Zealand KiwiSaver scheme providers.
The key principles of this arrangement are:
– Enhanced trans-Tasman retirement savings portability should complement a seamless trans-Tasman labour market.
– Portability should allow retirement savings to be dealt with in a manner that generally meets standards for the treatment of retirement savings that are set by the host country.
– Portability should not lead to an unnecessary loss in the value of retirement savings.
– Compliance and administration costs associated with the scheme should, where possible, be minimized.
This arrangement aims to preserve the integrity of the retirement savings systems of both countries while facilitating the movement of people between Australia and New Zealand. It’s always a good idea to consult with a financial advisor or tax professional when considering transferring retirement savings between countries. They can provide guidance based on your specific circumstances and the latest regulations.
Australia’s Superannuation Scheme:
1. Voluntary Contributions: In addition to the mandatory employer contributions, members can make voluntary contributions to their superannuation. These can be either concessional (before-tax) or non-concessional (after-tax) contributions.
2. Salary Sacrifice: Members can voluntarily choose to sacrifice part of their salary to their super fund. This is a pre-tax contribution and can be a tax-effective way to boost one’s super balance.
3. Spouse Contributions: If a member’s spouse is not working or working less, the member can make contributions to their spouse’s super fund.
4. Self-Employed Contributions: If a member is self-employed, they can make voluntary contributions to their super fund.
New Zealand’s KiwiSaver Scheme:
1. Voluntary Enrollment: KiwiSaver is a voluntary, work-based retirement savings scheme. While new employees are automatically enrolled upon employment, they can choose to opt-out.
2. Contribution Rates: Once enrolled, members can choose to contribute either 3%, 4%, 6%, 8% or 10% of their before-tax pay. If a member does not choose a contribution rate, the default rate of 3% is applied.
3. Self-Employed or Non-Working Members: If a member is self-employed or not working, they can join KiwiSaver by contacting a KiwiSaver provider directly.
In both countries, the schemes are designed to be flexible and accommodate the varying financial circumstances of their members. They allow members to contribute more towards their retirement savings if they wish to do so, and provide various options for making these additional contributions. Please note that the exact rules and options may vary based on individual circumstances and specific scheme rules. For more detailed information, you may want to visit the official websites of the Australian Taxation Office and Inland Revenue Department, New Zealand.
Transfers to Australia
Transferring retirement savings from a KiwiSaver scheme to a participating Australian super fund involves several steps and conditions:
1. Eligibility: To be eligible for the transfer, you must:
– Have an Australian Tax File Number (TFN) to transfer your retirement savings to an Australian super account.
– Be a member of an Australian super fund that accepts KiwiSaver.
– Have migrated to Australia and have an Australian home address.
– Be willing to transfer the entire balance of your KiwiSaver.
2. Contact Your Funds: Check with your KiwiSaver scheme provider and your Australian super fund to see if they will charge any fees for transferring or accepting funds on your behalf.
3. Information Needed: When transferring super savings from your KiwiSaver scheme to an Australian super fund, your fund may request details of any:
– Australian-sourced or New Zealand-sourced amounts that form part of the transfer.
– Tax-free component of an Australian-sourced amount.
– Amount not previously counted towards the non-concessional contributions cap.
– Restricted non-preserved or unrestricted non-preserved amounts.
4. Transfer Process: To transfer your KiwiSaver scheme savings across to an Australian super fund, you need to:
– Contact your Australian super fund to obtain a KiwiSaver Acceptance Letter.
– Then contact your KiwiSaver fund to obtain a ‘Trans-Tasman Portability Approval’ form and check on any other of its requirements for transferring to an Australian complying super fund.
– Send the completed documents to your KiwiSaver fund for processing.
5. Transfer Limits and Excess Contributions: Transfers from a New Zealand KiwiSaver scheme to a complying Australian super fund must be the whole balance of the account – partial transfers are not allowed. New Zealand-sourced retirement savings transferred to Australia are treated as non-concessional (or personal) contributions and are subject to the non-concessional contributions cap.
Remember, these rules can be complex and may have significant tax implications, so it’s always a good idea to seek professional advice when considering transferring or withdrawing a lump sum from a foreign super fund.
When transferring super savings from your KiwiSaver scheme to an Australian super fund, your fund may request the following details:
1. Australian-sourced or New Zealand-sourced amounts that form part of the transfer.
2. Tax-free component of an Australian-sourced amount.
3. Amount not previously counted towards the non-concessional contributions cap.
4. Restricted non-preserved or unrestricted non-preserved amounts.
You should ask your KiwiSaver scheme provider to provide these details. The Australian super fund will only accept the transferred amount when they have this information.
In addition, you generally need to meet the following conditions:
– You have emigrated to Australia.
– You have an Australian Tax File Number (TFN).
– You are willing to transfer your entire KiwiSaver balance. Partial transfers are not permitted.
Please note that the information provided here is of a general nature and may not apply to your specific circumstances. Always consult with a professional for personalized advice.
1. Transfer Eligibility: The transfer will be regarded as a member contribution and therefore, the client must be eligible to contribute to super. This means that at the time of transfer the client must be:
– Under age 65
– Aged 65 to 74 and have met the ‘work test’ in that financial year.
2. Tax File Number (TFN): An Australian super fund cannot accept a transfer from a foreign fund unless they have your tax file number (TFN), or you give it to them within 30 days of the transfer. If your Australian super fund doesn’t have your TFN within 30 days of the transfer they must return the whole amount to your foreign fund.
3. Australian Tax: You (or your Australian super fund) must pay income tax on the part of a foreign fund transfer that is applicable fund earnings. The applicable fund earnings are the earnings on your foreign super interest that have accrued since you became an Australian resident for tax purposes.
4. The 6-Month Rule: None of your foreign super interest is treated as applicable fund earnings if you transfer it to Australia within six months of either:
– Becoming an Australian resident for tax purposes
– Your foreign employment ceasing.
5. Trans-Tasman Retirement Savings Portability Scheme: If you want to transfer your retirement savings from a KiwiSaver scheme to an Australian super fund, you must:
– Have emigrated to Australia (you will need to sign a statutory declaration confirming this and provide evidence that you have departed New Zealand and are living at an Australian address)
– Have an Australian tax file number.
Remember, tax laws and government subsidies can be complex and change frequently, so it’s important to stay updated and seek professional advice when needed. For more accurate information, it’s always a good idea to consult with the Australian Taxation Office or a professional in the field.
The Trans-Tasman Retirement Savings Portability scheme allows for the transfer of retirement savings between Australia and New Zealand. Here are the details on transfer limits and excess contributions:
Transfer Limits:
– Transfers from a New Zealand KiwiSaver scheme to a complying Australian super fund must be the whole balance of the account – partial transfers are not allowed.
– There are no limits on how much you can transfer from an Australian super fund to a KiwiSaver scheme. However, you must transfer the whole balance of your Australian fund.
Excess Contributions:
– New Zealand-sourced retirement savings transferred to Australia are treated as non-concessional (or personal) contributions and are subject to the non-concessional contributions cap.
– Contributions over this cap may result in you receiving a determination of excess non-concessional contributions and you may be required to release an amount from your super fund and/or pay extra tax.
– The amount you can transfer is determined by your personal non-concessional contribution (NCC) cap. As of July 1, 2022, the cap is $110,000, or $330,000 if you’re under 75 and utilizing the bring forward arrangements.
– Contributions that exceed this cap are taxed at a rate of 46.5 percent.
Please note that these are general guidelines and the exact rules may vary based on individual circumstances and specific scheme rules. For more detailed information, you may want to visit the official website of the Australian Taxation Office.
Tax Implications
Transferring retirement savings to or from New Zealand can have several tax implications:
1. Transferring from New Zealand to Australia: Transferring your funds from a New Zealand KiwiSaver scheme to an Australian super fund is not taxed. However, once the funds are invested in the Australian super fund, any investment returns will be taxed at the fund level, impacting your returns within the fund. The transfer from a KiwiSaver scheme to an Australian super fund is treated as a personal non-concessional contribution (NCC). The amount you can transfer is determined by your personal non-concessional contribution (NCC) cap. As of July 1, 2022, the cap is $110,000, or $330,000 if you’re under 75 and utilizing the bring forward arrangements.
2. Transferring from Australia to New Zealand: An amount of Australian-sourced retirement savings transferred to a KiwiSaver scheme under the portability arrangements will be treated as exempt from tax at the point of entry. Australian-sourced retirement savings will be subject to certain Australian complying scheme rules, including a minimum retirement age of 60. These savings cannot be withdrawn to purchase a first home.
3. Transferring from UK to New Zealand: While there’s a tax-free window of four years from the moment you become an NZ tax resident, if you transfer after this term expires you could end up paying tax on the whole sum transferred. Once the money is in NZ, tax is payable on the income from your investment under the Portfolio Investment Entity (PIE) tax rules.
Remember, these rules can be complex and may have significant tax implications, so it’s always a good idea to seek professional advice when considering transferring retirement savings to or from New Zealand.
Transfers of retirement savings contributions, particularly from foreign super funds to Australian super funds, can have significant tax implications. Here’s how they are generally treated:
1. Tax on Applicable Fund Earnings: When received in Australia or by an Australian resident, transfers from a foreign super fund may be taxed on the applicable fund earnings part of the transfer. The applicable fund earnings are the earnings on your foreign super interest that have accrued since you became an Australian resident for tax purposes.
2. Tax-Free Transfers Within Six Months: Foreign superannuation lump sums are tax-free provided they are transferred within six months of the individual member becoming a resident of Australia. They are considered non-assessable non-exempt income.
3. Tax on Lump Sum Withdrawals: If you withdraw a lump sum directly from a foreign super fund, the tax treatment depends on when you receive the lump sum payment. A lump sum payment you receive within six months of becoming an Australian resident for tax purposes is tax-free if certain conditions apply. If you receive a lump sum payment more than six months after becoming an Australian resident for tax purposes or ceasing foreign employment, you can either include the lump sum amount that relates to your applicable fund earnings in your assessable income for the year or transfer the entire value of your super interest directly from the foreign super fund into a complying Australian super fund and choose to include all or part of your applicable fund earnings in the fund’s assessable income.
4. Impact on Taxable Income: The amount of the lump sum that is considered taxable income can increase your overall taxable income for the year, potentially pushing you into a higher tax bracket.
5. Double Taxation Agreements: Australia has double taxation agreements with many countries to prevent double taxation of income. Depending on the country where your foreign super fund is located, you may be able to claim a foreign income tax offset for any foreign tax paid on transfers or withdrawals from your foreign super fund.
Understanding these tax implications can help you make informed decisions about transferring or withdrawing funds from a foreign super fund. It’s always a good idea to consult with a tax professional or financial advisor to understand the specific tax implications for your situation. Please note that the information provided here is of a general nature and may not apply to your specific circumstances. Always consult with a professional for personalized advice.
Exceeding the non-concessional contributions cap in Australia can have significant tax implications. Here are some key points to consider:
1. Excess Tax: If a member’s non-concessional contributions exceed the cap, a tax of 47% is levied on the excess contributions. Individual members are personally liable for this tax and must have their super fund release an amount of money equal to the tax.
2. Withdrawal Option: If you exceed the non-concessional contribution cap, the Australian Taxation Office (ATO) will let you know. They will allow the excess amount to be withdrawn, less taxes representing the earnings on the excess amount, taxed at your marginal rate, minus a 15% offset. If you decline to take this withdrawal offer, a further tax of 47% will apply to the entire excess amount.
3. Contribution to Cap: If you go over the concessional contributions cap, your excess concessional contributions will count towards your non-concessional contributions cap unless you release them from your super fund.
4. Re-Contribution: Any amount you withdraw and re-contribute to your super fund is counted as a new non-concessional contribution, unless you have claimed and been allowed a deduction for this amount or it is a re-contribution of COVID-19 early release superannuation amount.
Remember, tax laws can be complex and change frequently, so it’s important to stay updated and seek professional advice when needed. For more accurate information, it’s always a good idea to consult with the Australian Taxation Office or a professional in the field.
Practical Implications
Transferring retirement savings between Australia and New Zealand under the Trans-Tasman Retirement Savings Portability scheme can have several implications for individual tax planning and strategy:
1. Tax Efficiency: Transferring funds between countries can be a tax-efficient strategy. For example, New Zealand-sourced retirement savings transferred to Australia are treated as non-concessional (or personal) contributions and are subject to the non-concessional contributions cap. If managed correctly, this can result in a lower tax liability.
2. Excess Contributions Tax: Contributions over the non-concessional cap may result in you receiving a determination of excess non-concessional contributions and you may be required to release an amount from your super fund and/or pay extra tax. This could impact your overall tax planning strategy.
3. Income Stability: The tax-efficient strategy is achieved by long-term income stability and characterized by low withdrawal rates early in retirement. This can have implications for your retirement income planning and tax strategy.
4. Tax on Withdrawals: If you receive a lump sum payment more than 6 months after becoming an Australian resident for tax purposes or ceasing foreign employment, you can either include the lump sum amount that relates to your applicable fund earnings in your assessable income for the year, or transfer the entire value of your super interest directly from the foreign super fund into a complying Australian super fund and choose to include all or part of your applicable fund earnings in the fund’s assessable income. This can have tax implications depending on your individual tax situation.
5. Impact on Tax Residency: The transfer of retirement savings could potentially impact your tax residency status, which in turn could have implications for your overall tax liability.
Please note that these are general guidelines and the exact impact on individual tax planning and strategy will depend on individual circumstances. For more detailed information, you may want to consult with a tax advisor or visit the official website of the Australian Taxation Office.
When dealing with the Trans-Tasman Retirement Savings Portability scheme, there are several potential pitfalls and common mistakes to avoid:
1. Not Checking Fund Participation: Not all Australian super funds and New Zealand KiwiSaver schemes participate in the scheme. Before initiating a transfer, it’s important to confirm that both your Australian super fund and your New Zealand KiwiSaver scheme are participating in the scheme.
2. Partial Transfers: Transfers from a New Zealand KiwiSaver scheme to a complying Australian super fund must be the whole balance of the account – partial transfers are not allowed. Attempting to make a partial transfer could result in complications or delays.
3. Exceeding Non-Concessional Contributions Cap: New Zealand-sourced retirement savings transferred to Australia are treated as non-concessional (or personal) contributions and are subject to the non-concessional contributions cap. Contributions over this cap may result in you receiving a determination of excess non-concessional contributions and you may be required to release an amount from your super fund and/or pay extra tax.
4. Not Providing Necessary Information: When transferring super savings from your KiwiSaver scheme to an Australian super fund, your fund may request details of any Australian-sourced or New Zealand-sourced amounts that form part of the transfer. Failing to provide these details could result in the Australian super fund refusing to accept the transferred amount.
5. Not Understanding Home Purchase Restrictions: Australian-sourced retirement savings transferred to a KiwiSaver scheme under the portability arrangements are subject to certain Australian complying scheme rules, including a minimum retirement age of 60. These savings cannot be withdrawn to purchase a first home.
6. Not Understanding Tax Implications: One of the principles of the portability arrangements is that transferring retirement savings across the Tasman should not lead to an unnecessary loss in value of those savings. To protect the value of retirement savings, such transfers between New Zealand and Australia will be exempt from entry or exit taxes. However, once the funds are invested in the Australian super fund, any investment returns will be taxed at the fund level, impacting your returns within the fund.
Given the complexity of these rules and the potential tax implications, it’s always a good idea to seek professional advice when considering transferring retirement savings to or from New Zealand.
Conclusion
Seeking professional advice when considering Trans-Tasman Retirement Savings transfers is crucial for several reasons:
1. Understanding Tax Implications: Transferring retirement savings between Australia and New Zealand can have significant tax implications. A professional can help you understand these implications and plan accordingly.
2. Navigating Complex Rules: The rules governing Trans-Tasman Retirement Savings transfers can be complex. A professional can help you navigate these rules and ensure that you are in compliance.
3. Maximizing Retirement Savings: A professional can provide advice on how to maximize your retirement savings through strategic planning.
4. Avoiding Penalties: Failure to comply with the rules governing Trans-Tasman Retirement Savings transfers can result in penalties. A professional can help you avoid these penalties by ensuring that you are in compliance.
5. Personalized Advice: Everyone’s financial situation is unique. A professional can provide personalized advice based on your specific circumstances and goals.
Remember, the decision to transfer retirement savings is a significant one that can have long-term impacts on your financial future. It’s always a good idea to seek professional advice before making such a decision. Please note that the information provided here is of a general nature and may not apply to your specific circumstances. Always consult with a professional for personalized advice.
