Understand the key terms
'Super withdrawal' is the amount that you are withdrawing or transferring from your foreign superannuation scheme.
'Contribution amount' is the lesser of:
- The super withdrawal.
- The amount of recognised contributions minus any earlier super withdrawals.
- The amount of recognised contributions minus contributions left immediately before earlier super withdrawals.
Contributions are recognised when they are made under the mandatory rules of the scheme.
If they were made by an employer, they must be subject to employer superannuation contribution tax (ESCT) or fringe benefit tax (FBT).
'Assessable period' begins on the later of:
- The date you become a New Zealand resident who owns a foreign super scheme.
- The end of your exemption period.
The assessable period ends on the date you obtain the foreign super withdrawal or transfer.
It doesn’t include time when you are a non-resident.
Work out your assessable income
Assessable income is the amount of your super withdrawal minus your contribution amounts.
(super withdrawal – contribution amounts)
Find your related year fraction
The year fractions are percentages given that correspond to the number of income years.
Your income years begin when your assessable period begins.
It ends on the date the foreign super you obtain a foreign super withdrawal or transfer.
Calculate your tax obligations
Multiply your assessable income by the fraction assigned to your schedule year.
(assessable income x schedule year fraction)
The outcome of this calculation is the amount that must be included in your income tax return (IR3).
Kim moved to New Zealand on 21 February 2006 and became a New Zealand tax resident from that date. On 12 August 2018 she transferred $25,000 from her foreign superannuation scheme to New Zealand. Her four-year exemption period ended on 28 February 2010. There were no contributions made to the scheme while she was a New Zealand resident so her recognised contributions are zero. There are nine income years beginning in the period 1 March 2010 to 12 August 2018 so Kim multiplies her $25,000 lump sum by 40.26%.
Using the schedule method:
(super withdrawal – contribution amount) x schedule year fraction
($25,000 - 0) x 40.26% = $10,065
Kim must include overseas income of $10,065 in her income tax return which may be taxed at her marginal tax rate.