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Bill to provide flexibility over foreign super

Bill to provide flexibility over foreign super

Revenue Minister Todd McClay has introduced changes to the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Bill to provide greater choice to individuals who decide to transfer their foreign superannuation before 1 April 2014.

“This amendment is about providing foreign superannuation holders with extra flexibility when it comes to complying with their tax obligations,” Mr McClay says.

The Bill introduced the ‘15 per cent option’ for those who withdrew a lump sum or made a transfer from their foreign superannuation scheme and did not comply with the rules at the time.

The changes extend the availability of the 15 per cent option to those whose funds haven’t actually been transferred to New Zealand before 1 April 2014, but who can show they have lodged an application before that date.

“Funds transfers can be a lengthy process, so this extension is good news for those wishing to take up the 15 per cent option.”

“For transfers or withdrawals before 1 April 2014, a person can either calculate the actual amount of tax payable under the rules at the time or simply apply the 15 per cent option. People who choose the 15 per cent option can include 15 per cent of their transferred or withdrawn foreign superannuation in their 2013–14 or 2014–15 income tax return and have their tax rate applied to that amount.”

“If an individual’s marginal tax rate is 33 per cent, they would effectively pay just under 5 per cent tax on the amount they transferred or withdrew.”

“I have also asked IRD to clear up a few common myths relating to the tax treatment of foreign superannuation. One such misconception is that foreign superannuation holders could be facing tax of 100% on their pension, which is entirely untrue,” Mr McClay says.
Further clarification of the new rules are available at http://taxpolicy.ird.govt.nz/foreign-superannuation

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