Q)I left NZ last year and am now a resident of Canada. I am retired and contributed to a KiwiSaver scheme from inception in 2007 until 2010. I missed one year but my account shows that the government contributed the year I missed. My question is, can I at this stage make a contribution for the year missed? I do realize that I am no longer a resident and will wait until I reach 65 to remove any funds from the scheme.
A)Hi, thanks for writing and give my regards to the motherland. Your question is bound to be of interest to other international ex-pats who don't see themselves retiring in New Zealand.
Once you make a permanent move from New Zealand, you have two options with respect to your KiwiSaver. You can leave your funds invested and wait till you reach 65 or else cash in your account now.
I'll address this last one first.
If you should find yourself in need of that money, you'll be eligible to withdraw all your contributions, your employer contributions and whatever gains they've made, less the government's share. You'll be able to keep the kick-start but the member tax credits go back to Government.
You'll find some detail on Inland Revenue's KiwiSaver website here. In brief, you'll need a statutory declaration confirming that you have left the country permanently. You'll also require evidence of it in the form of boarding passes and the like, passport records and proof of address at your new residence.
Going back to your question about making contributions retroactively on the assumption that you want to keep your money in KiwiSaver until you reach the age of eligibility: I checked with Inland Revenue which confirmed that you can in fact continue to making voluntary contributions. They won't be backdated to that year that you missed, but that won't make a difference.
With respect to those mysterious government contributions for the year you skipped, IRD claimed this is an impossibility. Don't worry, I didn't give them your name. They insisted member tax credits are paid only on the basis of payments that you make yourself so were confused by the question. In any case, if you are keen to keep investing (considering it part of a diversification strategy) you'll be doing it on your own steam. Government contributions only feed through if you're living and working in New Zealand and paying into the scheme through the PAYE system, you'll remember that.
What you may want to look into from your end is the tax handling of KiwiSaver. Canada and New Zealand have a double tax agreement in place so you won't be charged twice on your investment but the rules tend to get a little blurry around the issue of foreign investment funds. In New Zealand, some foreign pensions are regarded as income and therefore taxed that way, when you bring the money over. (See "What the F.I.F is going on" by our tax columnist Terry Baucher.'')
Whether Canada Revenue Agency will see your KiwiSaver fund in the same light, I'm not sure. You get taxed along the way with KiwiSaver, and so when it comes time to withdrawing the funds, the redemption is supposed to be tax free, here.
Unless you're keeping up with the news from afar, there some talk here in New Zealand about introducing a capital gains tax. Unless National is ousted from Government it won't stand a chance however if Labour should happen to win the election, capital gains could be on the radar, KiwiSaver gains included, potentially.
Personally, I can't see KiwiSaver getting nailed with capital gains, given that it is taxed already along the way. But never say never.
Canadian pensions work differently from KiwiSaver. There you can invest 18% of your gross salary into a retirement saving plan (up to $22,000) and not get taxed on it. It's an incentive to self-fund your retirement. It also has the effect of offsetting the tax you pay on your income. Where you get hit is at the time of retirement.
If you don't want any big surprises best to get this sussed out sooner than later. It might may more sense to take your money out now, while the Kiwi dollar is still high and reinvest it in a RSP back home. Just a thought. I'm not a financial adviser.
And as a final note, if you do decide the grass is greener back in NZ and want to get back into your KiwiSaver, after having closed it out, you'll be free to do so but that kick-start is a one-time deal.
To you have a question on KiwiSaver. Send us an email and we'll try to get you an answer.