Genesis

Hi, can we confirm that the 4 year 'tax free' period on UK earnings being taxed in NZ (bought insome time after 2006) and the 4 year 'transitional' thing are 2 very different things? Also that link from the 1st page has years 0-2 at zero tax , 3-5 at 15% and then 6-8 at 30%

We have been here 7 years this april...do we fall into the 30% branch or are we allowed to deduct the 4 year transitional period ths knocking it down to 15%

Do you have any idea when all this will be set in stone?

My understanding is that we were all sold this correctly by our advisors that these QROPs WERE tax free and the IRD is simply poroposing changing the goal posts, turning the clock back and 'doing' us??

Genesis

And what in my case where there is no way to find out how the fund has done each year?

Genesis

Can I ask when should one do this please? Wait until the new goal posts are set? It seems strange trying to evaluate my potential tax bill until we know what will be passed...or should I start spending cash now with a specialist in this area? Thanks in adavnce.

chc4me

Yes it does. It is stated on page 6 point 2.18 "New Migrants Tax Four Year Relief". This applied for new migrants before 2006.

I have to clarify my previous answer to your question here Bev. Part of the proposal allows for tax to be paid as it should have been applied at the time (page 21, 4.11). As you arrived in 2004, you had a 4 year period of exemption. After the 4 years, you should have paid tax. If you can show a loss in each year, then no tax would be payable.

Consulting a tax accountant now might be the best course of action, especially if you can show losses. Many accountants will offer the first hour for no charge so that you can access their services.

I've no idea when this might or will become law. But if it is retrospective it won't matter when it is implemented.

chc4me

Hi Genesis,
The proposal document issued by IRD clearly names two periods, one of 4 years for migrants before 2006 and one of 4 years for Transitional Residents after 2006.

In your situation, years since migration count (not years since the end of transitional period). Therefore you would be in the 30% bracket - however there is a retrospective option which ignores the years you have been here and allows you to elect a flat rate of 15%. To qualify for the 15% inclusion rate, you must disclose the existance of a transfer to IRD before 1 April 2014.

The 15% inclusion rate is likely to be the best option for previous pension transfers such as yourself. Don't forget, this is 15% of the value of the total pension, and then that is taxed at your marginal tax rate.

As far as I know, the only way to obtain previous yearly values for your pension is to request it from the pension company. From what you have said, this is near impossible.

scrubbedexpat094

I'm still trying to get my head round this. OH came out firstly at the end of Feb 2005 & I followed May 2005. Returned to UK August 2005!!!!

Ping-ponged back here mid-Jan 2007 & have been here ever since. Neither of us have filled in a tax form at all since we arrived. We assumed that the IRD would have informed us if we had to (just like in the UK), and obviously we have been rather naive here

I just have an NHS pension in the UK but OH has a private pension, he also contracted out of SERPS. He's got a few shares in the UK & Australia plus a couple of small investments (the name of these escapes me, but govt tax free schemes).

I'm guessing we may well be in deep do-do with the IRD.

I've not encouraged us to bring our pensions over because I would hope to return home someday.
I feel sick at paying a huge lump of tax on this money. Will we get any of this money back if we return home????

I'm probably asking stupid questions here but I panic about money & then I stick my head in the sand.

BEVS

By george. I think I've nearly understood.

My summary of the situation as I understand it.

Any of us that kept our pensions back in the UK after we had been NZ resident for 4 years became liable for taxation on the pension funds.

I believe this to encompass all manner of overseas ( UK) pension funds , no matter from where, no matter how small or large.

Once we had been NZ tax resident for 4 years we should have been declaring these funds and their performances on our tax returns ***

Most of us have not simply because we did not know and/or believed the funds to be tax exempt until the point where the funds were drawn as pension income.

To NZ IRD it doesn't matter what that reason is.

NZ IRD are now wanting to net in what they see as unpaid tax & so have formulated these new proposals which will act retrospectively.

The proposal terminology suggests this is to simplify matters for us poor thicko migrants that did not or could not understand the NZ IRD tax law on these overseas pension funds.
Of course, it is simply a tax gathering exercise for those already here and also to ensure no future migrants with overseas pension funds slip through the graspy mitts of the NZ IRD.

Whatever. We are now caught between a rock and a hard place. We can wait for the new rules and get hammered. Or we can dob ourselves in before April 2014 and get hammered.
Either way, NZ IRD want goodly sums of tax from all us migrants that have or have had overseas pension funds out there.

There is one very slight chink of hope for those of us already here more than 4 years . That is that NZ IRD can be persuaded , by submissions ,that to tax long standing migrants retrospectively is not on.

1 - We could wait for this to play out in the hope of a positive outcome. However, many of us will have been here longer then and the tax penalty % would be all the worse.

2 - We could elect not wait for this to play out and pay the flat rate of 15% tax on the funds.

3 - We could leave the country.

4 - We could utilise the help of dedicated accountants to help with the submission process. I have read of one company who are mounting submissions & where you take out an insurance against the accountants fees for this battle.

5 - and I am not sure how this would pan out in the long term. One could decide to simple keep quiet.
Thing with that is ,what happens at point of wanting to draw the funds as pension income, or when one wants to transfer the pension funds over to an NZ superannuation fund.
I rather think that the NZ IRD will have their beady eyeballs up for anything like this. Possibly any new transfers would have to be reported to NZ IRD etc.

6 - Keep quiet because one isn't at all sure one will be staying in NZ but be aware that if one does stay one could get hammered not just for the unpaid tax but also poked in the migrant eyeball with penalties and interest.

ChCh4 me. Have I got this right ?


(*** I'm keeping this simple. I realise that the reality of actually trying to fathom how to declare fund value plus gain or loss would be virtually impossible for some pension funds - NZ IRD do seem to have had a 'method' for those though)

chc4me

Hi Vital, Your question is a little different to other scenerios already discussed. So for your situation....

1) Under current tax rules, you should be paying FIF tax on all foreign held investments and pension savings.
2) The new proposals are suggesting taxing transfers OR taxation on receipt of pension benefits. Therefore if you leave it in the UK, no NZ tax is payable until retirement. When you retire, then any income receivied AND any lump sum payment received will be taxable.
3) If you return to the UK, your NZ tax obligation ends.

You may need to talk to an accountant about when your 4 year tax exemption starts due to the ping pong event.

chc4me

Bev, your summary looks pretty good to me. Just one small admendment... It is not a 15% tax as such. Tax is payable on 15% of the transferred value at your marginal rate. e.g if the Pension amount totals $200,000 x 15% = $30,000 you then pay tax on this 30K which at say the highest tas rate of 33% =$9,900 tax to pay.

BEVS

Rats ! So I haven't got this right then.

If the funds remain in the UK then those migrants are not affected by these new proposals whilst funds remain overseas?

However, they should still be making tax returns .

It is just us lot that made transfers UK to NZ that are to get stuffed then?

scrubbedexpat094

Many thanks, has put my mind at rest. So it seems we are better off leaving our pensions in the UK until we decide where we are going to be.

scrubbedexpat094

That stinks!

BEVS

Looks like you need to be doing tax returns VBS from the point after you are deemed to be NZ tax resident.

The personal pension plan figures may not be too hard to get but the NHS one will be harder to fathom. I agree with ChCh4me. You need an accountant that knows what they're doing with this, particularly ref. the NHS one.

BEVS

You know what ! I would never have brought over the funds had I known this was going to happen. I would have left them there and simply declared the funds once I realised I had to do this.

As everyone here knows , I remain ambiguous about being in NZ at all. I never felt I would remain here forever. I only thought to bring the funds over because it seemed sensible to have them actively invested and where we could perhaps contribute to them.

I remain left with the feeling of being scammed.

scrubbedexpat094

I shall get my better half onto this asap

Seems I upset a couple of Kiwis on my FB page