New Zealanders To Suffer Tax Hit When Bringing Savings Home

by Mary Swire, Tax-News.com, London

21 August 2008

International consultants Mercer have made claims this week that New Zealanders are set to make little or no financial gain when claiming back money locked in Australian super funds unless the Government implements significant tax changes.

The news comes in light of an announcement last week by the country's Trade Minister, Phil Goff, who claimed that a new regime allowing retirement savings portability between the two countries would release billions of dollars locked in Australian superannuation funds.

However, this week, Mercer- which runs the KiwiBank KiwiSaver scheme - have pointed out that in reality, it's highly unlikely that individuals will benefit from the scheme unless it is offset by a series of changes to New Zealand's tax regime.

Without any changes, Mercer have claimed that New Zealanders would benefit more from leaving their savings in Australia and retrieving them, tax free, from the age of 60.

Speaking out about their claims this week, Mercer's New Zealand business leader Bernie O'Brien explained:

"Our modelling is from a conservative basis and errs in New Zealand's favour, but it still confirms, with New Zealand's current tax regime, that leaving the money in Australia would provide a better financial return.

"We welcome the closer alignment that makes it easier for New Zealanders to re-claim their retirement savings if they choose to, however, the only advantage of moving money from Australia back to NZ is a desire to manage all your retirement assets in one place."

According to Mr O'Brien, under the current tax regime, an individual with a balance of NZD100,000 over 20 years could be up to NZD36,000 better off leaving superannuation savings in Australia.

"Alignment of the tax rates within the PIE regime or having a preferred tax rate, as Mercer has called for, is critical to supporting New Zealanders manage their finances, save for their future and to encourage them to repatriate their capital back to New Zealand," Mr O'Brien went on to explain.

"Standardising the tax rate at 17% - which is a weighted average of the new 12.5% and 21% tax rates post 1 April 2011 - or lower - will make KiwiSaver more attractive for people to join and will assist in attracting capital into KiwiSaver from within New Zealand and from Australia. "If further tax changes are not made, New Zealand risks suffering from net migration of both capital and people to Australia ...," he concluded.

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