Q. My son is working in Australia. He has a KiwiSaver account here with over $7000 in it and the earnings are covering the fees, etc. He doesn't know where he will eventually settle and has an Australian super account contributing 9 per cent of a substantial wage. He is in a position to continue to add to the NZ scheme - should he top up his KiwiSaver each year to get the govt contribution and is this allowed? He still has NZ bank accounts and comes home to visit regularly.
A. Your question is very timely. Back in 2009 New Zealand and Australia signed the Transtasman Portability Agreement, to encourage the flow of labour both ways across the Tasman and to enable workers to consolidate their retirement savings at some point.
While our country put the necessary legislation in place in 2010, we have been waiting for Australia to reciprocate. Legislation was finally passed in Australia last week. From July 1, 2013, KiwiSaver members working in Australia will be able to apply to transfer their KiwiSaver funds into a qualifying Australian super scheme, while those New Zealanders who have Australian super funds locked up across the Tasman will be able to apply to bring those funds home, to their KiwiSaver scheme.
This is the first time that Australia has implemented an international superannuation portability scheme. One of the aims is to support "progress toward the goal of a single economic market", according to the Australian Minister for Financial Services and Superannuation, Bill Shorten.
This could prove to be quite a windfall for New Zealand. The Australian Superannuation scheme has been compulsory for the past 20 years and a large number of New Zealanders who worked there and have since returned home, may soon be able to retrieve their savings. Those who have lost touch with their savings can use the "Super Seeker" tracking service provided by the Australian Taxation Office.
Transferring super either way across the Tasman should be undertaken only once all the implications are understood. It would be wise to get professional advice, particularly if the amounts involved are large. There are differences between the Australian and NZ schemes, particularly around age of eligibility and tax rates. Putting all your savings into one scheme may be convenient but it may not be the best option for everyone.
Can your son continue paying into his KiwiSaver scheme in order to receive the government contribution (Member Tax Credits) while he is working in Australia? I'm afraid not. Member Tax Credits are a bonus for KiwiSaver members who are currently living in New Zealand (with a few exceptions such as government employees serving overseas).
Member Tax Credits are claimed each July by the scheme provider. According to Inland Revenue, the scheme provider "has a responsibility to determine the member's eligibility for entitlement to the member tax credit each time the annual claim is made".
If someone slips through the net, on reaching the age of eligibility (usually age 65) if they apply to withdraw their funds they will have to sign a Statutory Declaration that their principal place of residence was New Zealand. If there were periods when their principal place of residence was not New Zealand, they have to provide specific dates. This will enable Inland Revenue to check that Member Tax Credits were rightfully paid. It is one of the reasons why getting your money out of KiwiSaver at age 65 is not as quick and straightforward as many people expected.
Shelley Hanna is an Authorised Financial Adviser FSP12241. Her disclosure statement is available on request and free of charge by calling 8703838. The information contained in this article is of a general nature and is not intended to provide personalised advice. If readers have any KiwiSaver questions they would like answered please go to www.peak.net.nz or email firstname.lastname@example.org.