In-limbo Australian superannuation money should flow more freely to its NZ owners under a proposal tabled by the Labour-led government last week.
The tweak to trans-Tasman superannuation portability rules, contained in NZ government omnibus tax legislation, opens a direct route for KiwiSaver members to any so-called ‘lost super’ held by the Australian Tax Office (ATO).
Currently, the ATO holds over A$20 billion of unclaimed super money, a significant chunk of which could belong to New Zealanders who have worked in Australia over the last three decades.
In 2013 the Australian and NZ governments brokered a deal to allow ‘complying’ superannuation and KiwiSaver money to flow both ways across the Tasman as people emigrated either way – subject to certain restrictions. At the time, $5 billion of the lost super pool was estimated to belong to New Zealanders who may have returned home.
The agreement requires all money to transfer from an Australian complying super fund to a KiwiSaver account. However, the process for lost super – or unclaimed super money (USM) – is complicated by the fact the ATO is not a complying super fund.
“Instead, New Zealanders currently wanting to recoup USM held by the ATO must first transfer these savings to an Australian superannuation scheme before they can be transferred to a KiwiSaver scheme,” an explanatory note in the new draft tax legislation says. “As many affected New Zealanders will no longer have an Australian superannuation account, this acts as a significant hurdle to the repatriation of USM to New Zealand.”
The new bill removes the technical roadblock, giving KiwiSaver members the option to transfer any lost super direct from the ATO. But they have to find it first: a task made slightly easier through this ATO search function.
According to the draft bill, the lost super update will come into force “through an exchange of diplomatic notes between the Governments of Australia and New Zealand”.
“Before amendments are made to the Arrangement, amendments to legislation in New Zealand (in this Bill) and legislation in Australia first need to have been passed into law,” the proposal says. “It is unlikely that both New Zealand and Australian amendments will be passed until late 2021, at the earliest.”
Given the historical lack of enthusiasm in Australia for addressing the claims of NZ citizens it could be a long wait.
Even under the original 2013 super portability agreement, transfers have been stymied by a general indifference among Australian super funds to implementing the necessary technical changes.
Super funds are not obliged to establish a KiwiSaver transfer option – and, indeed, only a handful (notably, ANZ) have done so to date. Most, if not all, KiwiSaver schemes can accept Australian super transfers.
Nonetheless, Australian super fund transfers have picked up considerably over the last couple of years with more New Zealanders returning home. According to the latest Financial Markets Authority (FMA) KiwiSaver annual report, some $181 million shifted across from Australian super during the 12 months to March 31 last year. (By contrast, only $7.6 million emigrated from KiwiSaver accounts to Australian counterparts over the same period.)
About $43 million of Australian super fund money ended up in KiwiSaver funds managed by ANZ during the latest reporting period, Investment News NZ data shows. Mercer, which also has strong trans-Tasman links, exported more than $23 million from Australia to its KiwiSaver scheme.
In addition to setting annual tax rates, the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Bill, introduced by Revenue Minister Stuart Nash, covers a host of other technical changes including new obligations for custodians and aligning the end-of-year reporting date for locked-in portfolio investment entities (PIE) – such as KiwiSaver schemes – with their free-range PIE cousins. Following the change all PIE funds will have to file final tax reports by May 15 rather than the current June 30 date for locked-in schemes.