An amendment has been announced today, to foreign superannuation tax changes in the Taxation Bill (Annual Rates, Foreign Superannuation, and Remedial Matters), which extends the opportunity for people to take advantage of a special 15% option on foreign superannuation withdrawals.
From 1 April, new tax rules will apply to New Zealanders holding foreign superannuation scheme interests (read more about the new rule). The Bill also contains an option for members of foreign superannuation schemes to “square” their tax liability if they should have been paying tax on income, or on withdrawals from the scheme, before 31 March 2014 but have not. This special option limits the taxable amount of any withdrawals from foreign superannuation schemes between 1 January 2000 and 31 March 2014 to 15% and is intended as an amnesty of sorts, for previous non-compliance.
The 15% option will now be available to anyone who has applied to their foreign superannuation scheme for the release or transfer of funds to a New Zealand scheme before 1 April, including where the transfer is not completed by that date. Prior to this amendment it would have been necessary for the transfer to have been completed in order for the 15% option to be available.
“This is a positive clarification which provides New Zealanders with a great opportunity to get their foreign superannuation in order and take advantage of the 15% option.” says Rebecca Armour, Tax Director and Head of International Executive Services at KPMG. “ In our experience, transferring superannuation interests from a foreign fund to New Zealand can take a long time and this change means that more people will be able to benefit from the amnesty on offer.” says Armour.
Armour says that many people are still unaware of the changes to the tax treatment of foreign superannuation, which will take effect from 1 April 2014. Under the new rules, tax will be payable on amounts from foreign superannuation schemes at the time they are transferred to New Zealand. The percentage of the transfer that is taxable increases, based on the amount of time a person has lived in New Zealand. For example, someone who has lived here for 15 years will be taxed on nearly 50% of their foreign superannuation.
“For people who have been living in New Zealand for a long time, they may wish to consider withdrawing their foreign superannuation to access the more favourable 15% option.” says Armour. This latest amendment means that as long as an application is made to the foreign superannuation scheme to withdraw the funds by 31 March, the 15% option will be available.
While the Bill has not been enacted yet, it is expected to become law soon. The tax, under the 15% option, will need to be paid in the tax return for either the 2013-2014 or 2014-2015 year.