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Mercer Says Super Tax Needs To Change For Nzers To Benefit

Fuseworks Media
Fuseworks Media

Wellington, Aug 21 NZPA - New Zealanders will make no financial gain claiming back money locked in Australian super funds unless the Government makes significant tax changes on this side of the Tasman, according to international consultants Mercer.

Last week Trade Minister Phil Goff said a proposed regime allowing retirement savings portability between the two countries would free up billions of dollars locked in Australian superannuation funds.

But today Mercer said that, based on its financial modelling, the reality was that without any complementary changes to New Zealand's tax regime, New Zealanders would be better off financially if they leave their savings in Australia and pick them up, tax free, from the age of 60.

"Our modelling is from a conservative basis and errs in New Zealand's favour, but it still confirms, with New Zealand's current tax regime, that leaving the money in Australia would provide a better financial return," said Mercer's New Zealand business leader Bernie O'Brien.

"We welcome the closer alignment that makes it easier for New Zealanders to re-claim their retirement savings if they choose to, however, the only advantage of moving money from Australia back to NZ is a desire to manage all your retirement assets in one place."

Under the current tax regime, an individual with a balance of $100,000 over 20 years could be up to $36,000 better off leaving superannuation savings in Australia, he said.

Mr O'Brien said all KiwiSaver schemes currently were, or invested in, portfolio investment entities (PIEs), in which investment earnings were generally taxed at either 19.5 percent or 30 percent, depending on the saver's tax rate.

Australian superannuation was generally taxed at 15 percent, with the net amount available tax-free from age 60.

Mercer has called for superannuation in New Zealand, especially KiwiSaver, to have a lower tax rate on investment earnings to attract capital into KiwiSaver and encourage saving for some time.

"Alignment of the tax rates within the PIE regime or having a preferred tax rate, as Mercer has called for, is critical to supporting New Zealanders manage their finances, save for their future and to encourage them to repatriate their capital back to New Zealand," Mr O'Brien said.

"Standardising the tax rate at 17 percent -- which is a weighted average of the new 12.5 percent and 21 percent tax rates post 1 April 2011-- or lower will make KiwiSaver more attractive for people to join and will assist in attracting capital into KiwiSaver from within New Zealand and from Australia.

"If further tax changes are not made, New Zealand risks suffering from net migration of both capital and people to Australia ..."

Mr Goff said last week that Australian Superannuation Minister Nick Sherry estimated a considerable amount of the $13 billion in "lost accounts" under the Australian Superannuation Guarantee belonged to New Zealanders who had returned home.

"With portability, he has undertaken to have New Zealanders' accounts in the Australian system proactively identified. This would be a huge bonus for many New Zealanders," Mr Goff said.


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