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New tax rules on foreign super schemes

29 April 2005 Media Statement

New tax rules on foreign super schemes

The government will introduce tax changes to improve the New Zealand tax treatment of accrued entitlements in foreign superannuation schemes, Revenue Minister Michael Cullen announced today.

“The superannuation issue is a tax impediment to maintaining an open labour market between Australia and New Zealand, which is a major benefit of CER, Dr Cullen told the International Fiscal Association conference today.

“Moreover, business feedback is that the potential tax consequences of having interests in a foreign employment-related super scheme are a disincentive to people taking up permanent or long-term employment here.

“For this reason, the government proposes to exempt specified Australian employment-related schemes from the foreign investment fund rules. We will need to work with Australia on the proper scope of the exemption.

“In Australia, employers generally make compulsory contributions into Australian superannuation funds on behalf of employees, who do not generally have access to their superannuation entitlements until they reach retirement age.

“Those who come to New Zealand for long-term or permanent employment – whether Australians or returning New Zealanders – may be required to pay tax on those or subsequent entitlements under our foreign investment fund rules.

“The foreign investment fund tax rules will also be amended to make the current exemption for interests in employment-related foreign superannuation schemes more generous. At present, the exemption applies only to new migrants and entitlements acquired while the person concerned was not a resident of New Zealand.

Changes to be introduced in the taxation bill planned for May this year will extend the exemption to returning New Zealanders as well.

The exemption will also cover entitlements acquired up to the end of the fifth year of each new period of New Zealand residence. It will take effect for persons who become resident in New Zealand on or after 1 April 2006,” Dr Cullen said.


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