Tackling the Trans-Tasman Portability Conundrum
Mon Aug. 6th 2018
Transferring your super fund across the Tasman made easy
It's been almost 5 years since a Law was passed that allows superannuation funds to be transferred between Australia and New Zealand. So why are so many investors still facing issues when trying to move their money across the Tasman and what can we do to help?
I met with a client a while ago and whilst reviewing his KiwiSaver fund, we got to talking about how he had been paying into a superannuation during his time working in Australia. He said he had already considered moving this money to his KiwiSaver, but upon doing his own research it became apparent that this was not as easy as he thought, given there is Legislation in place to allow this to happen.
The good news is, if you are returning to New Zealand and want to move money from Australia, this is generally quite straightforward. The complications arise when you are trying to move money from a New Zealand superannuation fund to Australia.
Due to an unprecedented number of changes encountered by the Australian Superannuation industry in the last few years, it has been said that these types of transfers are not a priority for them, resulting in a very small number of complying Providers. The arrangement is also voluntary meaning that it is not compulsory for scheme Providers to accept transfers.
If you are moving your super fund to New Zealand, however, the process is typically much more straightforward. KiwiSaver schemes are generally more modern and sophisticated than Australian superannuation schemes as they are newer, meaning there are less system and process changes required than if you were transferring into Australia. Due to the difference in longevity between the two schemes, Australian super fund balances are usually higher, meaning it is more lucrative for New Zealand to allow transfers of larger balances than it is for Australia to accept the smaller balances of the more recent KiwiSaver funds.
Regardless of what direction you are attempting to transfer, there are many benefits to be had in doing so. If you currently hold funds in both countries, you will be paying fees on both, so consolidating into one fund is an effective way of reducing the amount you are paying in fees. There is also an element of flexibility in that you can transfer your fund back to the originating country should you permanently move back there after the initial transfer has taken place.
If you are transferring funds from Australia to New Zealand, you may be able to withdraw your Australian-sourced proportion of the fund at age 60, providing you meet the Australian definition of retirement. Having all your retirement funds in one place allows you to keep track of its performance and having it in the currency in which you'll be cashing it in, you can get a better idea of its value. That being said, it is important to remember that the fund will be subject to a change in exchange rates, and different tax rates apply between the two countries with Australia set at 15% on balances below $300,000, whereas New Zealand's PIR (prescribed investor rate) varies between 10.5%-33%.
Before you transfer your funds, there are some important points to consider and it is recommended that you seek financial advice before doing so. There may be benefits associated with your superannuation, such as insurance or guaranteed retirement payments which would be sacrificed when you transfer to KiwiSaver. We can help you determine what benefits you have and how they can be replaced in New Zealand to ensure you remain covered and protected. With many different KiwiSaver schemes available, it is essential that you choose one that is right for you and your circumstances – we can offer advice on the relevant schemes and determine which one is most suitable and highlight any conditions that you may be subject to in terms of contributions and withdrawal restrictions.
As with most transactions, certain documentation will be required and there are complex forms that need to be submitted. We will take the time to go through these with you and ensure they are completed accurately so as not to impede the transfer process. We have extensive experience liaising with superannuation fund managers and Australian call centre operatives. There is an estimated $18 billion worth of 'lost' Australian super funds; we can assist in checking if you have funds you may not even be aware of and the best way of consolidating these.
Whilst it is commonly found that it is more difficult to transfer your super from New Zealand to Australia, it is not impossible. It is important to remember that there are many benefits to transferring your super across the Tasman, however there are also drawbacks so make sure you seek informed financial advice before making the move.
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