Time Running Out for Overseas Pension Transfers

freeimages.co.uk photos of objectsTime Running Out for Overseas Pension Transfers

Proposed new IRD rules which may take effect from 1 April, 2014 will treat transfers or payments from overseas pensions as taxable income with certain exceptions. For the first four years of being in New Zealand the portion treated as income will be 0%.  For each subsequent year the portion increases, until it reaches the point where 100% of the transfer or payment is treated as taxable income.

Given the widespread non-compliance with existing rules the IRD have proposed that if you have previously transferred a pension you can declare it and pay tax as if only 15% of the transfer value was income. This amnesty is for all transfers prior to 1 April 2014.  Those who have been in New Zealand more than seven years should consider transferring their foreign pension prior to 1 April, 2014 to take advantage of a significant opportunity to save on tax. For someone who has been in New Zealand for 20 years and has an overseas pension worth $100,000, the tax savings could be up to $18,655.  Those who are considering returning to the country in which the pension is based may be better not to arrange for a transfer.

If your overseas pension has already been converted to an annuity, that is, you are receiving a regular monthly pension payment, it is unlikely your tax situation will change and you do not need to do anything.

Because everyone’s personal circumstances are different, it is important to get advice from an expert as to the best course of action. Accountants with specific knowledge of tax on overseas investments and financial advisers who specialise in pension transfers can assist. It can take several weeks to arrange for documentation from the overseas pension provider to transfer a pension, so time is now of the essence.

Subscribe

Subscribe to our e-mail newsletter to receive updates.

,