Legislative changes

New Zealand and Australian Governments announce savings

portability scheme

October 2009
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The Australian Government has agreed in principle to the signing of a memorandum of understanding with New Zealand to establish a trans-Tasman retirement savings portability scheme. The scheme will allow the transfer of super savings between Australian super funds and New Zealand KiwiSaver funds. The introduction of the scheme will allow both New Zealanders and Australians to consolidate their financial affairs in their country of residence. At present, Australian permanent residents are only able to transfer their retirement savings within the Australian super system. The introduction of the scheme will allow individuals to streamline and consolidate their superannuation where it is split across the two countries. One of the benefits of the scheme is that it enables members to avoid paying multiple sets of fees and charges from different superannuation funds. Here are some points to keep in mind if you think you may be eligible to take advantage of the scheme when it is introduced. These include:

• the arrangements are voluntary. You don’t have to transfer your savings if you move to Australia or vice versa;
• once transferred, typically the superannuation rules of the country you now permanently reside in will apply;
• KiwiSaver funds can only be transferred to Australian complying schemes regulated by the Australian Prudential Regulation Authority (APRA). This means you cannot transfer your savings to an Australian self-managed superannuation fund;
• if you choose to transfer your savings to Australia from New Zealand when you emigrate, you must transfer them in full;
• consider the differences in the rate of taxation of investment earnings between Australia and New Zealand. Australia has a flat rate of 15 per cent on earnings. From 1 April 2010 the New Zealand tax rate on superannuation earnings will range from 12.5 per cent to 30 per cent. Comparison between the two tax regimes is not straightforward because of other factors; and
• before you make any decisions, you should consider all exit fees and other charges that may be applied and any changes to insurance benefits. Additionally you should consider the impact this could have on insurance entitlements. When considering changes to your superannuation, we recommend that you seek financial advice.

To implement the scheme, legislative changes are required in both countries, which are expected to be in place around mid-2010. We will keep you updated on any changes.

For more information about these proposed changes, and how they may affect your investment and retirement plans, please contact a Plum Member Services Consultant on 1300 55 7586, any business day, 8.00am to 6.00pm, Australian Eastern Standard Time (AEST).