For Australian residents who transferred their UK pension to a Qualifying Recognised Overseas Pension Scheme (QROPS) in Malta or Gibraltar before 9 March 2017, there may still be an opportunity to transfer these funds to New Zealand without incurring the 25% Overseas Transfer Charge (OTC). Additionally, this move could provide Australian tax benefits under the double tax treaty between New Zealand and Australia.
Avoiding the Overseas Transfer Charge (OTC)
The OTC was introduced on 9 March 2017 by HM Revenue & Customs (HMRC) to prevent tax avoidance by imposing a 25% charge on certain pension transfers to QROPS outside the UK. However, for transfers from a Malta or Gibraltar QROPS to a New Zealand QROPS there is no OTC where the original transfer out of the UK was done prior to 9 March 2017.
Tax Benefits of Transferring to New Zealand: The Double Tax Agreement (DTA)
New Zealand and Australia have a robust Double Tax Agreement (DTA) that can offer significant tax advantages for Australian residents:
- Avoiding Double Taxation: The DTA ensures that pension income is not taxed in both countries, providing a clear tax position and potentially reducing your tax liabilities.
- Tax Treatment of Withdrawals: When pension funds are held in a New Zealand QROPS, any withdrawals or income may benefit from favourable tax treatment under Australian tax law, particularly for those who qualify for tax-free treatment of foreign superannuation funds.
- Flexibility and Control: A New Zealand QROPS might offer greater flexibility in terms of investment options and access to funds, compared to Malta or Gibraltar schemes.
Why Transfer from Malta or Gibraltar to New Zealand?
- Simplified Tax Position: Australia’s position on New Zealand superannuation schemes is very clear and New Zealand schemes can, on application, be officially recognised in Australia.
- Currency Management: New Zealand schemes have Australian currency denominated funds.
- No impact on Australian superannuation caps: So you can continue to build your Australian superannuation pot without worries around non-concessional caps.
Conclusion
For Australian residents with a QROPS in Malta or Gibraltar from before 9 March 2017, transferring to a New Zealand QROPS offers a strategic opportunity to avoid the OTC and benefit from the Australia-New Zealand DTA. It provides potential tax efficiencies, simplifies compliance with Australian superannuation rules, and offers better control over retirement savings. As always, professional financial advice is recommended to ensure compliance with both UK and Australian regulations and to optimise your retirement planning strategy.
