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Trans-tasman portability of retirement savings
From 1 July 2013, new rules surrounding the portability of retirement savings will come into effect.
Under the new regime, certain Australian superannuation funds and New Zealand KiwiSaver funds will be able to be transferred between countries, effectively enabling a person to “take home” any contributions they have made to an approved retirement scheme while they have been resident for a period of time in the other country.
The rules will certainly benefit NZ residents returning home from Australia, a country which usually requires compulsory retirement savings contributions to be made, as opposed to NZ’s voluntary system. Prior to the introduction of these rules, the NZ resident would effectively have to leave the contributions in Australia, commonly referred to as “lost accounts” which is presently estimated to be some $NZ21b.
Transfers may only be made between a NZ KiwiSaver scheme and an Australian complying superannuation scheme regulated by the Australian Prudential Regulation Authority (APRA) in respect of NZ to Australia transfers. In addition, a KiwiSaver member must permanently migrate to Australia to be able to transfer their retirement savings. Australia to NZ transfers must be to a KiwiSaver fund.
Transfers between schemes will generally not be subject to any entry or exit taxes, with the exception of the transfer of more than $150,000 NZ savings to an Australian fund which could be subject to the rules known as the non-concessional contributions cap.
With respect to KiwiSaver funds, all savings including any Government kick-start or member tax credits will be able to be transferred.
Where the transfer is Australian sourced retirement savings, the Australian minimum retirement age of 60 will be retained, so the member will be able to withdraw the funds from the KiwiSaver account at this time. Usually withdrawals cannot be made from KiwiSaver until the individual has reached 65 years of age. However unlike NZ KiwiSaver funds, the transferred Australian funds will not be able to be withdrawn earlier to assist in the buying of a first home.
Equally, a transfer of KiwiSaver funds to Australia will retain a withdrawal age of 65, even though Australia usually permits withdrawals at the age of 60.
Once the funds transfer has occurred, any further contributions or post transfer earnings on the transferred amount will be subject to the host countries retirement savings scheme rules.
Finally any need to withdraw funds in either country due to financial hardship, will be governed by the applicable countries withdrawal rules in this respect.