News and information about the Government's tax policy work programme, including:
- proposed changes to the laws that Inland Revenue is responsible for
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Changes to foreign superannuation tax rules
Tax policy news
The Government proposed reforms to the rules for taxing interests in foreign superannuation.
The proposals were introduced on 20 May 2013 in the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill and enacted on 27 February 2014 in the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014.
The objective of the changes is to make the rules for taxing foreign superannuation simpler and fairer.
The main changes are:
- The foreign investment fund (FIF) rules (which tax interests in foreign investments on an annual basis) will generally no longer apply to interests in foreign superannuation.
- Instead, from 1 April 2014, tax will only need to be paid when a payment is received or there has been a transfer to a New Zealand or Australian scheme.
- There will be special rules for calculating tax on lump sums which will depend on how long the person has been resident in New Zealand.
- In general, no tax will need to be paid if a person is simply transferring from one foreign superannuation scheme to another foreign superannuation scheme.
- People who have made a lump-sum withdrawal or a transfer to another superannuation scheme (or have applied for a withdrawal) between 1 January 2000 and 31 March 2014, but did not comply with their tax obligations at the time, have an option to pay tax on only 15% of the lump sum amount. Alternatively people can calculate the actual amount of tax that should have been paid at the time.
- People who transfer their foreign superannuation scheme into a KiwiSaver scheme will have the option to make a withdrawal from their KiwiSaver to pay their tax bill.
- The new rules will not apply to periodic pensions. These will continue to be taxed in the way that most pensions currently are (that is, in full on receipt).
They also will not apply to transfers from Australian superannuation funds as these are exempt from New Zealand tax under existing law.
The changes are effective from 1 April 2014.
The changes were enacted on 27 February 2014 in the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014.
Inland Revenue's foreign superannuation pages provide information about the changes.
For more information
For more information about the changes see:
- Inland Revenue's website: Foreign superannuation (note: original news item on Inland Revenue's website is no longer available, see Internet Archive capture of the news item - Changes to foreign superannuation tax rules (27 February 2014))
- The bill progress page
- A special report on the changes - comprehensive coverage of the new Act will be in the May edition of the Tax Information Bulletin
- Tax Information Bulletin Volume 26 - Issue 4 - May 2014 - Taxation for foreign superannuation