The legislation to enable the transfer of superannuation savings between Australia and New Zealand has finally been passed in the Australian Parliament.
As a result, from 1st July 2013 there will be ‘portability’ of superannuation between Australia and New Zealand. The Bill outlines the taxation implications of transfers to Australia from New Zealand, which we will look at in a future post.
The transferred savings to your New Zealand KiwiSaver must be identifiable as separate funds within the KiwiSaver fund. As this will provide additional administration and cost to the KiwiSaver provider, don’t assume that all providers will offer this facility.
Australian‑sourced retirement savings held in KiwiSaver schemes:
- may not be withdrawn to purchase a first home;
- may be accessed when the individual reaches age 60 and satisfies the Australian definition of retirement at that age; and
- may not be transferred to a third country; and
- are subject to New Zealand tax and superannuation rules;
- the Australian Funds are not taxed on exit from the Australian superannuation scheme if you are a NZ citizen or permanent resident;
- there may be other rules and regulations that impact on how your Australian superannuation is treated in the KiwiSaver scheme under the SIS regulations.
There are advantages and disadvantages in moving your Australian Superannuation to your New Zealand KiwiSaver investment, which include:
Tax: New Zealand KiwiSaver Funds are currently taxed on earnings at a higher rate than Australian superannuation investments. However, in general New Zealand KiwiSaver investments do not currently have capital gains tax, whereas Australian superannuation does.
Fees: New Zealand KiwiSaver Fund fees are generally quite a lot less than Australian superannuation investments.
Amalgamation of your investments: A number of New Zealanders have small amounts invested in multiple Australian Superannuation funds, when they have worked for different employers. These are sometimes subject to minimum annual administration fees. By amalgamating all your investments in your one KiwiSaver investment, you can reduce fees, have a consistent investment approach and monitor your investments more successfully.
Diversification: At present you are only entitled to have one KiwiSaver account, so this may limit your diversification opportunities.
Currency Risk: If you live in New Zealand and plan to retire here, by holding your superannuation investments in New Zealand dollars, you are taking currency risk in the future out of your financial planning.
Control and monitoring: New Zealand based investors can find it difficult to monitor their superannuation investments in Australia. By bringing your funds back to New Zealand, you are likely to find that you feel that you have more control over your superannuation investments.
The decision to transfer your Australian Superannuation Funds into your New Zealand KiwiSaver fund is personal and unique to you and your situation. There are a number of factors that need to be taken into account, and you need to ensure that you have canvassed these before you make your decision.
By Carey Church