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Last minute foreign super amendment welcome

Author: Jono Boyce and Kirsty Hallet

Do you have foreign superannuation entitlements?  An amendment to the proposed foreign superannuation tax rules makes taking advantage of the 15% concession easier for taxpayers. 

In our February 2014 Tax Alert, we outlined the actions required by taxpayers to take advantage of the new rules which tax interests in foreign superannuation schemes as set out in the Taxation (Annual Rates, Foreign Superannuation and Remedial Matters) Bill.  The Bill was passed through Parliament last week with a late, but much welcomed amendment providing additional flexibility for taxpayers to take advantage of the 15% concessional rule.  

Readers will recall that while the new rules will apply from 1 April 2014, a concession is available where a withdrawal or transfer to a New Zealand or Australian scheme is made before 1 April 2014.  Under the concession, your taxable income in New Zealand is limited to 15% of the amount transferred or withdrawn.  People who choose this option can include 15% of their transferred or withdrawn foreign superannuation in their 2013–14 or 2014–15 income tax return and have their marginal tax rate for that income year applied to that amount. 

As the rules were originally drafted it was necessary for the transfer of funds to have been completed prior to 1 April 2014 to benefit from this exemption, which having regard to the timeframe between the rules being announced and 1 April 2014 is simply not possible for many taxpayers.

A late amendment to the rules has been introduced providing additional flexibility for taxpayers wishing to avail themselves of the concession. Specifically, the availability of the 15% concession has been extended to those whose funds haven’t actually been transferred to a New Zealand or Australian scheme before 1 April 2014, but where it can be shown that an application has been lodged before that date.  This is a welcome amendment as fund transfers can be a lengthy process.

As a result of this amendment taxpayers who had previously ruled out benefiting from the concession due to the time it may take to arrange a fund transfer may wish to re-consider their options.  As we have previously alluded to, there is no single answer to what course of action should be taken as the best choice for any particular taxpayer will depend on your personal circumstances.     

 


Tax Alert March 2014 contents

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