New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Jul 31st 2012, 2:36 am
#46
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
New Tax proposals have been put forward which will penalise new migrants. The proposals suggest taxing UK Pensions if you are outside of the 4 year transitional resident period. This includes the 25% Tax Free withdrawal at retirement!!
If you have been in NZ for more than 4 years, and have either transferred your pension to NZ or still have your private pension in the UK, this is a must read. There is the full proposal and a Fact Sheet at this link.
It is proposed that from the 2011/12 year:
•tax would be payable when a person receives a pension or lump sum, or transfers a lump sum to another scheme (rather than on an annual basis)
•periodic pensions would continue to be taxed as they currently are
•a portion of any lump sum amount would be taxed depending on the length of time between when a person arrived in New Zealand and when they withdraw or transfer their lump sum.
Submissions on the proposals should be made by the 3rd of September.
If you have been in NZ for more than 4 years, and have either transferred your pension to NZ or still have your private pension in the UK, this is a must read. There is the full proposal and a Fact Sheet at this link.
It is proposed that from the 2011/12 year:
•tax would be payable when a person receives a pension or lump sum, or transfers a lump sum to another scheme (rather than on an annual basis)
•periodic pensions would continue to be taxed as they currently are
•a portion of any lump sum amount would be taxed depending on the length of time between when a person arrived in New Zealand and when they withdraw or transfer their lump sum.
Submissions on the proposals should be made by the 3rd of September.
Jul 31st 2012, 3:36 am
#47
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Hi Genesis,
IRD have proposed two options:
1) Pay tax based on the law at the time that you withdrew your UK pension (i.e transferred to NZ). This refers to the FIF rules which take into consideration profits from the investments. Very difficult to assess if your scheme was a final salary scheme.
2) Apply a fixed rate and tax that amount. In this option the rate is 15% of the transferred amount. If the law is retrospective as has been proposed, then this second option appears to produce the least tax - although each case will have different circumstances.
If you elect option 2, then as an example, you transferred $200,000 x 15% = $30,000 (this is the taxable amount). Then $30,000 x 33% =$9,900 Tax to pay.
The tax rate of 33% is the highest rate of tax, therefore the actual tax to pay may be lower depending on your annual income. Tax rates are 10.5% / 17.5% / 30% / 33%
The above assumes that the 4 year tax exemption does not apply in your circumstance.
You should consult a tax accountant with specialty in this area.
IRD have proposed two options:
1) Pay tax based on the law at the time that you withdrew your UK pension (i.e transferred to NZ). This refers to the FIF rules which take into consideration profits from the investments. Very difficult to assess if your scheme was a final salary scheme.
2) Apply a fixed rate and tax that amount. In this option the rate is 15% of the transferred amount. If the law is retrospective as has been proposed, then this second option appears to produce the least tax - although each case will have different circumstances.
If you elect option 2, then as an example, you transferred $200,000 x 15% = $30,000 (this is the taxable amount). Then $30,000 x 33% =$9,900 Tax to pay.
The tax rate of 33% is the highest rate of tax, therefore the actual tax to pay may be lower depending on your annual income. Tax rates are 10.5% / 17.5% / 30% / 33%
The above assumes that the 4 year tax exemption does not apply in your circumstance.
You should consult a tax accountant with specialty in this area.
Last edited by chc4me; Jul 31st 2012 at 3:40 am.
Jul 31st 2012, 3:48 am
#48
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Posts: 4,298
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Hi Genesis,
IRD have proposed two options:
1) Pay tax based on the law at the time that you withdrew your UK pension (i.e transferred to NZ). This refers to the FIF rules which take into consideration profits from the investments. Very difficult to assess if your scheme was a final salary scheme.
2) Apply a fixed rate and tax that amount. In this option the rate is 15% of the transferred amount. If the law is retrospective as has been proposed, then this second option appears to produce the least tax - although each case will have different circumstances.
If you elect option 2, then as an example, you transferred $200,000 x 15% = $30,000 (this is the taxable amount). Then $30,000 x 33% =$9,900 Tax to pay.
The tax rate of 33% is the highest rate of tax, therefore the actual tax to pay may be lower depending on your annual income. Tax rates are 10.5% / 17.5% / 30% / 33%
The above assumes that the 4 year tax exemption does not apply in your circumstance.
You should consult a tax accountant with specialty in this area.
IRD have proposed two options:
1) Pay tax based on the law at the time that you withdrew your UK pension (i.e transferred to NZ). This refers to the FIF rules which take into consideration profits from the investments. Very difficult to assess if your scheme was a final salary scheme.
2) Apply a fixed rate and tax that amount. In this option the rate is 15% of the transferred amount. If the law is retrospective as has been proposed, then this second option appears to produce the least tax - although each case will have different circumstances.
If you elect option 2, then as an example, you transferred $200,000 x 15% = $30,000 (this is the taxable amount). Then $30,000 x 33% =$9,900 Tax to pay.
The tax rate of 33% is the highest rate of tax, therefore the actual tax to pay may be lower depending on your annual income. Tax rates are 10.5% / 17.5% / 30% / 33%
The above assumes that the 4 year tax exemption does not apply in your circumstance.
You should consult a tax accountant with specialty in this area.
Hi, this is the response I have had from my QROPS provider.
Hi Dominic and Kate,
You both left UK in April 2005 and started the Pension Transfers May 2010.
There was no tax to pay on transferring your pension to NZ then or now under current legislation .
The IRD have put a discussion document out only re FIF taxation regime where funds in a foreign Superannuation Scheme worth over $50,000 pounds can be assessed for a 5% capital gains tax each year.
This applies whether you transfer or not so the sooner one transfers the lesser the liability.
The longer you leave funds there the bigger the liability.
Britannia will be sending out a letter shortly after taking taxation advice so we should wait until then.
It’s only a discussion document that’s been circulated and it’s not law yet.
Regards
Jul 31st 2012, 3:50 am
#49
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Hi, this is the response I have had from my QROPS provider.
Hi Dominic and Kate,
You both left UK in April 2005 and started the Pension Transfers May 2010.
There was no tax to pay on transferring your pension to NZ then or now under current legislation .
The IRD have put a discussion document out only re FIF taxation regime where funds in a foreign Superannuation Scheme worth over $50,000 pounds can be assessed for a 5% capital gains tax each year.
This applies whether you transfer or not so the sooner one transfers the lesser the liability.
The longer you leave funds there the bigger the liability.
Britannia will be sending out a letter shortly after taking taxation advice so we should wait until then.
It’s only a discussion document that’s been circulated and it’s not law yet.
Regards
Hi Dominic and Kate,
You both left UK in April 2005 and started the Pension Transfers May 2010.
There was no tax to pay on transferring your pension to NZ then or now under current legislation .
The IRD have put a discussion document out only re FIF taxation regime where funds in a foreign Superannuation Scheme worth over $50,000 pounds can be assessed for a 5% capital gains tax each year.
This applies whether you transfer or not so the sooner one transfers the lesser the liability.
The longer you leave funds there the bigger the liability.
Britannia will be sending out a letter shortly after taking taxation advice so we should wait until then.
It’s only a discussion document that’s been circulated and it’s not law yet.
Regards
Jul 31st 2012, 3:53 am
#50
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Posts: 38,613
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Gawd. I'm still confused.
We arrived July 2004. We finally transferred 2010.
I think these proposals will apply to us.
I can't get my head around the idea that IRD can apply a % of the fund on which to tax. This assumes there was a gain during the preceding years from leaving UK shores to transferring the funds.
I'm pretty darn sure there ended up being no gain. This was the time when the bottom fell out of such things . Values dropped through the floor.
We arrived July 2004. We finally transferred 2010.
I think these proposals will apply to us.
I can't get my head around the idea that IRD can apply a % of the fund on which to tax. This assumes there was a gain during the preceding years from leaving UK shores to transferring the funds.
I'm pretty darn sure there ended up being no gain. This was the time when the bottom fell out of such things . Values dropped through the floor.
Jul 31st 2012, 3:55 am
#51
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Joined: Sep 2006
Posts: 4,298
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Hi Genesis,
IRD have proposed two options:
1) Pay tax based on the law at the time that you withdrew your UK pension (i.e transferred to NZ). This refers to the FIF rules which take into consideration profits from the investments. Very difficult to assess if your scheme was a final salary scheme.
2) Apply a fixed rate and tax that amount. In this option the rate is 15% of the transferred amount. If the law is retrospective as has been proposed, then this second option appears to produce the least tax - although each case will have different circumstances.
If you elect option 2, then as an example, you transferred $200,000 x 15% = $30,000 (this is the taxable amount). Then $30,000 x 33% =$9,900 Tax to pay.
The tax rate of 33% is the highest rate of tax, therefore the actual tax to pay may be lower depending on your annual income. Tax rates are 10.5% / 17.5% / 30% / 33%
The above assumes that the 4 year tax exemption does not apply in your circumstance.
You should consult a tax accountant with specialty in this area.
IRD have proposed two options:
1) Pay tax based on the law at the time that you withdrew your UK pension (i.e transferred to NZ). This refers to the FIF rules which take into consideration profits from the investments. Very difficult to assess if your scheme was a final salary scheme.
2) Apply a fixed rate and tax that amount. In this option the rate is 15% of the transferred amount. If the law is retrospective as has been proposed, then this second option appears to produce the least tax - although each case will have different circumstances.
If you elect option 2, then as an example, you transferred $200,000 x 15% = $30,000 (this is the taxable amount). Then $30,000 x 33% =$9,900 Tax to pay.
The tax rate of 33% is the highest rate of tax, therefore the actual tax to pay may be lower depending on your annual income. Tax rates are 10.5% / 17.5% / 30% / 33%
The above assumes that the 4 year tax exemption does not apply in your circumstance.
You should consult a tax accountant with specialty in this area.
Jul 31st 2012, 3:58 am
#52
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Joined: Sep 2006
Posts: 4,298
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Gawd. I'm still confused.
We arrived July 2004. We finally transferred 2010.
I think these proposals will apply to us.
I can't get my head around the idea that IRD can apply a % of the fund on which to tax. This assumes there was a gain during the preceding years from leaving UK shores to transferring the funds.
I'm pretty darn sure there ended up being no gain. This was the time when the bottom fell out of such things . Values dropped through the floor.
We arrived July 2004. We finally transferred 2010.
I think these proposals will apply to us.
I can't get my head around the idea that IRD can apply a % of the fund on which to tax. This assumes there was a gain during the preceding years from leaving UK shores to transferring the funds.
I'm pretty darn sure there ended up being no gain. This was the time when the bottom fell out of such things . Values dropped through the floor.
No idea how they can calculate anything on my bigger police pension as I have stated there is only a final figure on that and not a per year increase that can be measured as they did not do that (they did for the last 3 years of the AVC). Are you going to wait to take advice or are you going to get some now. Not sure what advice can be given if no one knows what will pass??????
Jul 31st 2012, 4:00 am
#53
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
The proposal is not "5% on gains each year". The proposal is changing the rules for foreign retirement savings. Transfers would be taxed depending on how long you have been in NZ and will include a RETROSPECTIVE measure (see previous post re 15% inclusion rate).
It's all in the proposal, link attached on the first post, and is summaried on page 1 and 2 of the document. Well worth reading and far more reliable than most resources.
Jul 31st 2012, 4:08 am
#54
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Posts: 38,613
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Bet you wish you never started the thread ChCh4me. 
If I could prove my UK PPP made no gain from 2008 to 2010 would that let me off?
We arrived 2004. Transferred 2010
If I could prove my UK PPP made no gain from 2008 to 2010 would that let me off?
We arrived 2004. Transferred 2010
Jul 31st 2012, 4:09 am
#55
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Posts: 38,613
Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
The people who have our dosh don't seem to think it's an NZ IRD thing. They are currently insisting this is coming from the UK 
Makes me confident ---- not.
Makes me confident ---- not.
Jul 31st 2012, 4:23 am
#56
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
The policy was released by the Policy Division of the NZ IRD, it's been in the media and as a provider they should be all over this. Shameful.
Jul 31st 2012, 4:31 am
#57
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Example
The above example assumes an interest rate gain of 4%. What it doesn't take into consideration is that there may have been no gain whatsoever.
Example 1
Deirdre works in the United Kingdom for 20 years for the same employer. She starts on a salary of £40,000 which increases by 3% per year over that period. At the end of each year she contributes 9% of her gross salary to her defined contribution superannuation scheme, which accrues interest at an average interest rate of 4%. At the end of 20 years, her superannuation is worth £138,604.
She quits her job at the end of the 20th year and migrates to New Zealand. After the exchange rate conversion, the investment is worth $284,845. Of this amount, $198,732 constitutes contributions and the remainder ($86,113) is investment gains.
Deirdre decides not to become a transitional resident for the first four years in which she is a resident New Zealand-resident, as she elects to receive Working for Families tax credits.
After four years, Deirdre decides that it would be a good time to withdraw her superannuation savings. At an average interest rate of 4% in the foreign scheme over the four years, the amount has grown to $333,228. This is the value of the lump sum withdrawal to New Zealand.
Although Deirdre has made the withdrawal within four years of arriving in New Zealand she is not eligible for the transitional residents’ exemption. The relevant inclusion rate is 15%. For New Zealand tax purposes, $49,984 of the lump sum constitutes taxable income (being 15% of $333,228). Deirdre is currently studying and has no other taxable income. Under the current personal tax rate structure, the tax on her foreign superannuation withdrawal is $8,015. This represents an average tax rate of 2.4% on the $333,228 lump sum.
Deirdre works in the United Kingdom for 20 years for the same employer. She starts on a salary of £40,000 which increases by 3% per year over that period. At the end of each year she contributes 9% of her gross salary to her defined contribution superannuation scheme, which accrues interest at an average interest rate of 4%. At the end of 20 years, her superannuation is worth £138,604.
She quits her job at the end of the 20th year and migrates to New Zealand. After the exchange rate conversion, the investment is worth $284,845. Of this amount, $198,732 constitutes contributions and the remainder ($86,113) is investment gains.
Deirdre decides not to become a transitional resident for the first four years in which she is a resident New Zealand-resident, as she elects to receive Working for Families tax credits.
After four years, Deirdre decides that it would be a good time to withdraw her superannuation savings. At an average interest rate of 4% in the foreign scheme over the four years, the amount has grown to $333,228. This is the value of the lump sum withdrawal to New Zealand.
Although Deirdre has made the withdrawal within four years of arriving in New Zealand she is not eligible for the transitional residents’ exemption. The relevant inclusion rate is 15%. For New Zealand tax purposes, $49,984 of the lump sum constitutes taxable income (being 15% of $333,228). Deirdre is currently studying and has no other taxable income. Under the current personal tax rate structure, the tax on her foreign superannuation withdrawal is $8,015. This represents an average tax rate of 2.4% on the $333,228 lump sum.
Jul 31st 2012, 4:41 am
#58
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
I read that example and what I can't work out is that the example states the transfer was made in the first four years, but tax is still payable?? The proposal clearly states that the 4 year new migrant tax emeption will apply and therefore in this example there should be no tax to pay!
Jul 31st 2012, 5:09 am
#59
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
Actually, yes it would. Part of the proposal allows tax payers to use the rules that applied in each of the tax years. This is called the FIF rules and it is the FIF rules which tax the gains each year. You would need to show the annual value for each tax year and you would need the assistance of an accountant who specialises in this area.
I keep on reading the link thing. All 4 pages.
Question & sorry to be a ppain.
I arrived 2004. Transferred 2010 . Does the transitional 4 year period apply to me or not ? Am I looking to prove 2 years or 6 years ?
No kids , so have never claimed a tax credit bean here in NZ.
I still do not agree with this retrospective aspect at all & am not convinced about the tax liability on a pension fund.
New rules should become law moving forward , not looking back.
Would be happy to make a protest submission once I fully understand
1 - the new proposals
2 - FIF
3 - QFPA
I also need to work through the differing systems using my PPP as an example so I can plainly see what is what.
Jul 31st 2012, 5:11 am
#60
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Re: New Tax on non-NZ personal & occupation pension plans to hit migrants old and new
I read that example and what I can't work out is that the example states the transfer was made in the first four years, but tax is still payable?? The proposal clearly states that the 4 year new migrant tax emeption will apply and therefore in this example there should be no tax to pay!
Deirdre decides not to become a transitional resident for the first four years in which she is a resident New Zealand-resident, as she elects to receive Working for Families tax credits.
However, this would be unfair as 'Deidre' may not have understood the impact her decision to take family tax credit would make.