By Frank Newman on 25th September 2015
Last year the government changed the way overseas pensions are taxed. Unfortunately, hundreds of thousands of people receiving overseas pensions are not aware of the change and not aware their pension is taxable.
In summary the new tax rules that came into effect on 1 April 2014 are:
• If you transfer your overseas pension to New Zealand within 4 years of living in New Zealand, there is no tax to pay (note: Australian pensions are exempt).
• If you leave your transfer until after 4 years of living in New Zealand, you will have to pay tax on the amount transferred. The rate of tax is based on the number of years you have lived in New Zealand.
• Tax is not deducted at source from your overseas pension payments. You have to declare the income in your tax return.
As a transitional measure the government has allowed an amnesty to those who have made a lump-sum withdrawal or a transfer to another superannuation scheme between 1 January 2000 and 31 March 2014, but did not comply with their tax obligations at the time. Under the amnesty they will have an option to pay tax on only 15 percent of the lump sum amount.
It’s not too late to take advantage of that amnesty for those who have yet to file their 2015 annual return.
We have no doubt the IRD will go looking for evaders once the amnesty is up. With data matching it will be easy for the IRD to obtain a list of those who have transferred their pensions here and cross match it to their tax returns.
Contact us for more information.