Aussies finally move on super portability

Investing

Draft legislation allowing for portability of superannuation funds across the Tasman passed; expected to become law in July 2013

18th Sep 12, 2:24pm by Amanda Morrall

By Amanda Morrall

New Zealanders and Australians looking to shift or repatriate workplace superannuation schemes should be able to do so effective July 2013.

The Australia Government today tabled draft legislation that will move the trans-Tasman Portability Agreement one step closer to becoming law.

Australia's Minister for Financial Services and Superannuation, Bill Shorten, in releasing the draft legislation, said the law could affect thousands of Australians and New Zealanders.

“This will make it easier for people to move freely between the two countries, help consolidate their retirement savings in their country of residence and avoid paying fees and charges on accounts in the two countries,” said Shorten.

The trans-Tasman Portability Agreement, which New Zealand passed into law years ago, will have implications for thousands of KiwiSavers as well. KiwiSavers who permanently move to Australia will lose the option of being able to withdraw their funds after emigrating. Barring the other conditions for early access to KiwiSaver, investors will be forced to remain in the scheme until the qualifying age of retirement, currently 65. (For more see KiwiSaver Q&A here).

Under Australian law, both Australians and New Zealanders working across the Tasman cannot, at present, take their superannuation with them when they permanently leave Australia.

More than 50,000 New Zealanders moved to Australia in the last annual period measured by Statistics NZ, and around 14,000 Australians moved to New Zealand.

Shorten said the ability to consolidate one's superannuation funds would be a financial and administrative benefit to investors in both countries should they move.

“The new scheme will help Australians and New Zealanders make the most of their retirement savings, as they will be able to take their retirement savings with them across the Tasman when they move,'' said Shorten.

The agreement is also hailed as an initiative that could enhance labour mobility between Australia and New Zealand.

“This measure is an important step in our closer economic relations with New Zealand, and supports progress toward the goal of a single economic market, to which the Australian and New Zealand Governments are committed.”

The legislation is expected to be introduced into the Australian Parliament later this year, and is likely to take effect from 1 July 2013, said Shorten.

Submissions on the exposure draft close on 28 September 2012.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

17 Comments

by Matt in Auck | 18th Sep 12, 3:25pm 1347938719

Amanda, thanks for this article.

I just require clarification.

You say kiwis who are in Kiwisaver will lose the ability to withdraw their kiwisaver funds under the changes.

But then you quote Bill Shorten:

That seems to contradict your statement that kiwis will lose the ablity to take their kiwisaver funds with them to Australia. No???

by Amanda Morrall | 18th Sep 12, 4:03pm 1347940997

No worries. By "take", Shorten means you can move them across into a qualifying superannuation fund in Australia as opposed to withdrawing the funds (less the member tax credits) which previously you could do after 12 months upon your move to Australia. There may be a case for those still wanting to get out of KiwiSaver and getting their hands on the money given there legislation hasn't passed yet but it's a grey area now.

does that answer you question?

by Matt in Auck | 18th Sep 12, 4:57pm 1347944240

That clarifies thanks.

So under the changes, if I work in Aus for 10 years and move back to NZ then I'll be able to transfer my Aus super to NZ super, which can't be done now. Is that right?

by Fairfax O Rouke | 19th Sep 12, 11:37am 1348011454

Aussie Super in NZ Kiwisaver MIA. You cant currently transfer KS to oz or vice versa. Note State pensions are seperate and treated differently by both countries.

The law change is designed to enable portability of Private Oz Super and KS, so yes in 10 years you should be able to move your aussie Super funds into a KS here.

As there is no discussion allowed in regards to the State pension in NZ, you will get that also.

Disclaimer: Following advice given by anonymous person in a chat room is not always recommended. (The above is accurate though)

by MiniMe | 18th Sep 12, 8:06pm 1347955588

Sounds like they're finally moving on the law because they figure all those kiwis will bring more money than Aus will lose? Either way I'm (will be) amazed!! Finally!!

by Spidy Sense | 18th Sep 12, 9:03pm 1347958998

LOL I'll believe it when I see it and what is the withdrawl tax going to be?? Current DASP withdrawls attract 35% on top of the 15% already taken...... Anyways, why would you want to move your money from a well run Australian Fund to a boiler room kiwisaver fund????. The fund I work for has Life ($800k) and TPD ($500k) insurance attached to it and I pay $6.47AUD weekly

by StanGoodvibes | 19th Sep 12, 12:13pm 1348013610

Yeah Spidey I can't see the attraction either.

by Waripori | 19th Sep 12, 12:07pm 1348013225

There may be some interesting aspects to all of this. The Aussie rules around pensions are very complex and in general anyone with a largish super payout in Australia ( which will be most people as time goes on ) will be a self funded retiree and wont get the pension as i understand it. They would be better to bring their money here where they will get the Universal payment. They would have the benefit of a very advantageous savings scheme in Aussie ( very low rates of tax in the funds and savings from pre tax dollars ) as well as a tax payer funded pension here.

Have I got this right?

Because the funds in Australia are so tax advantaged I think most people with a reasonable sum in as Australian super should probably leave it there until they have to move it unless they want to consolidate savings to make it easier to monitor. It also gives savers a natural currency hedge and , if the money is in Australian domiciled assets , probably a manager with a bit more local knowledge.

by StanGoodvibes | 19th Sep 12, 12:18pm 1348013903

Spot on. And what happens if we go retire somewhere like Costa Rica? where you pay no tax on income (or pensions) earned outside the country -

Can I get my super from either Aus or NZ without having to pay tax on it as I won't have a tax domicile in either country?

God I hate tax. As a private healthcare, no-child high earner I get squat-all for all the tax I do pay.

by Ralph | 20th Sep 12, 7:17pm 1348125426

Yes. So let's wait and see the tax details ...

by Spidy Sense | 19th Sep 12, 1:43pm 1348018982

Stan, when you're eligible to withdraw your super in Oz (60+) it would be paid out tax free (income on assets outside super are taxable)

You're then free to do what you wish with the proceeds but depending on which country you hold allegience to you may have to declare overseas income/assets etc.....

P.S the legislation really isn't that complex...... Oz pension is means tested, NZ not. Super in Oz is concessionally taxed at 15% for pre-tax contributions and income earned. Kiwisaver Im not sure about???

by Waripori | 19th Sep 12, 1:53pm 1348019610

The P I E regime was bought in to ensure Kiwisaver did not disadvantage lower income savers. It basically means that the tax payable by the fund on your behalf is the same as if you were earning the income yourself. Tax on Kiwiaver earnings can thus be up to the maximum personal tax rate. In addition contributions come from tax paid dollars ( but the % contribution is calculated on gross). Aussie super has a much more advantageous tax treatment.

If, as I think is the case, New Zealanders resident in Australia for a fairly long time can accumulate Aussie dollars in a tax friendly way and then bring them back here on retirement as well as collecting NZ super that would seem to be excellent retirement planning.

by Fairfax O Rouke | 19th Sep 12, 2:59pm 1348023596

The British have been doing that for years. Build up your UK pension, spend 10 years from age 55 in NZ and then get your lump sum and NZ super...

by StanGoodvibes | 20th Sep 12, 6:37pm 1348123064

Excellent. So I can use my Aussie super lump sum to buy the yacht and still get a pension in NZ. Be nice to actually get something for all the tax I've paid in NZ over the years...

by steven | 20th Sep 12, 7:04pm 1348124681

Failry sure the IRD has now said that they will tax any lump sums as if they had been in NZ the whole time. So if you waltz in with $1m you pay a sliding scale of tax (depending on length of time you have been here before you bring it in). Bummer if you have paid tax on that money elsewhere, looks like you get taxed twice.

regards

by StanGoodvibes | 20th Sep 12, 6:41pm 1348123286

Spidy, being currently employed by the Superannuation Department at The Reserve Bank of Australia, I have to correct you on a couple of things:-

1. The first AU$165,000 is tax free if you are over 60, the rest is taxed.

2. Superannuation is compulsory and you are expected to live off that when you retire. It is possible to retire in Australia and still continue some form of paid work that does not affect my payments from my own superannuation in any way (i.e. my own super is not means tested). There is a means tested pension that's pretty rubbish, but if you take out your super to buy a primary place of residence that is offset against the pension (i.e. if you have $1,000,000 super and you spend that on a home, you still the get govt pension).

My questions re taxation of Superannuation is whether I get taxed on my Aussie super if I live overseas once I retire, and if so where the point of taxation would be.

Cheers.

by Spidy Sense | 20th Sep 12, 7:15pm 1348125337

Stan, you'll find that the tax free threshold (now $175k) applies for individuals between ages 55 and 59 who retire. 60 and above is tax free regardless of amount.

You may be confused with my abreviation "oz pension" by that I mean a centrelink pension which is the ozzie equivilant to nz's state pension scheme - which does actually exist and is in fact means tested.

In regards to the tax, if your Aussie super (not centrelink pension) stays within super and is in "pension phase" you access up to 10% of the balance per year as an income stream (tax free). You can leave it sitting in accumulation phase and draw lump sums (tax free) but that is an expensive way to do it due to exit fee's. The taxation point depends on your residency status I suppose.

Anyways, sounds like you guys down at the central bank may need to study up ; )