The Trans Tasman Agreement Allows UK Pension Transfers to NZ Super QROPS with No Tax for Residents in Australia
The Trans Tasman Agreement – The Trans-Tasman retirement portability agreement allows Brits moving to Australia to transfer their UK pensions to a Superannuation scheme in New Zealand and pay no taxes in Australia on their NZ super scheme as long as that scheme is a Registered Overseas Pension Scheme (ROPS, formerly QROPS) in New Zealand and registered in Australia.
At the current time, there is only one NZ Superannuation scheme which ticks these boxes.
Who Can Transfer to a NZ Super QROPS Which is Australian Registered
- Australians who are members of a UK, Irish, Dutch or Pillar II pension scheme returning to live in Australia
- Members of a UK Pension scheme moving to Australia
- Brits moving to Australia
- British expats already resident in Australia
- Irish pension scheme members moving to Australia
- Irish expats already resident in Australia
- Dutch pension scheme members moving to Australia
- Dutch expats already resident in Australia
- South Africans moving to Australia
- South Africans already resident in Australia
- Anyone who holds a Pillar II Pension Scheme moving to Australia or resident in Australia
Benefits of a NZ Super QROPS for Residents in Australia
- No “Pension Age Test” – transfer your UK pension to a NZ Super anytime
- No lifetime limit in New Zealand, transfer up to the UK limit which is 1,000,000 GBP pension pot
- Access your pension in Australia at age 55
- Pay zero tax on income, growth and death as long as you remain tax resident in Australia
- If you move outside Australia at a later date, you just pay income tax in your new country of residence on your pension
- Two Choice: Keep your pension in GBP or invest your pension monies in AUD
- Your pension income is paid directly into your Australian bank account at retirement or any bank account worldwide of your choice
- You can choose either a Managed GBP Fund or a Managed AUD Fund which use low cost index funds (ETFs) from Black Street, Vanguard and State Street
- You can make withdrawals in AUD, GBP or NZD
The History of the Trans Tasman Agreement
The Superannuation Legislation Amendment (New Zealand Arrangement) Bill 2012 removed a barrier to labor mobility between Australia and New Zealand. The idea was to fix the problem of Australians working in NZ and vice versa not being able to easily access their pensions without tax issues. Australians and New Zealanders working in Australia cannot take their superannuation with them when they permanently leave the country.
Approximately 50,000 New Zealanders moved to Australia in the last year, while around 14,000 Australian residents went to New Zealand. Under the new system, workers will be able to consolidate their retirement savings in their country of residence and avoid paying fees and charges on accounts in the two countries.
Bill Shorten, Australia’s Minister for Financial Services and Superannuation sees the bill as a stepping stone to a common single economic market between Australia and New Zealand. The legislation commenced on 1st of July 1, 2013.
The Trans Tasman Agreement and UK Pension Transfers to QROPS
The Trans Tasman Agreement was only written into legislation three years ago and it is expensive to get a New Zealand Superannuation scheme registered in Australia. On top of that, changes to the NZ regulations over the last eighteen months has restricted innovation, until now.
A new law called the Financial Markets Conduct Act (FMCA) requires all NZ pension schemes to have professional trustees and improved regulation. At the same time, the NZ Financial Markets Authority (NZ FMA) issued a joint notice with the Australian Securities and Investments Commission (ASIC) concerning trans-tasman mutual recognition which allows NZ schemes to register investment offers in both countries.
The Legal Side for UK Pension Transfers to NZ Supers for Residents in Australia
The NZ Superannuation scheme we are working with have had two tax opinions from NZ Accountants as well as a verbal opinion from a top accountant in Sydney and a Solicitors (QC) report on tax avoidance from a company in Australia.
Please note that NZ Kiwi Saver schemes are separate to NZ Superannuation Schemes and follow different rules.
We are working with a QROPS provider who has set up a New Zealand Superannuation scheme which is a Managed Investment Scheme with Dual registration in both countries and is a Zero rate PIE (Portfolio Investment Entity).
Under Article 18 of the double tax agreement, payments from a New Zealand Superannuation Fund are not taxable to an Australian resident, as it is considered ‘tax paid within the fund’. By making the fund a Zero Rate PIE, non-NZ tax residents can elect a tax rate of zero and therefore there is no tax on the income or the growth within the scheme.
In other words, you can transfer a UK pension to a NZ Super which is registered in Australia and ticks HMRC’s ROPS requirements and pay zero tax in Australia on your retirement benefits.
When seeking the report from the QC, the NZ Super trustees asked the QC for an opinion on a number of different scenarios. The short summary from the 44 page opinion is:
– A Transfer from a UK pension (or other foreign lump sum, e.g South African) to a NZ Superannuation Fund which is QROPS is not considered in breach of “part IVA of the income tax assessment act 1936-Superannuation Transfers” (Australia).
– Intent is important. Providing the intent is for retirement, and not tax avoidance, then not a breach.
From the Q.C:
“I am of the view that it is more probable than not that Part IVA will not apply to transfer of the UK pension to the NZ superannuation fund, if that is only what occurs.”
As underlined above, a foreign lump sum is fine, a lump sum from Australian sourced wealth, is more likely to be considered Avoidance. The trustees had hoped that the scheme might appeal to Australian Residents that had reached their Lifetime Concessional Cap for contributions to Aussie Super, but this is not advised.
The NZ Super scheme we are working with have partnered with a top accountancy firm in Sydney as a referral source for clients if a personal tax opinion is required, but obviously this would be at an additional cost.The Trans Tasman Agreement for Pensions and Retirement | QROPS by Richard Malpass