Is my Australian super taxed in New Zealand?

Is taking my super out taxed in New Zealand?

No. Inland Revenue (IRD) says so without conditions: "You will not be taxed on withdrawals or transfers from an Australian superannuation."

Its guide to foreign superannuation lump sums, IR1024, gives the date the rule took effect: "The Australian transfer exemption is effective from 1 April 2010. This means that when you transfer/withdraw a lump sum from an Australian scheme into New Zealand, this is not taxable."

The reason sits in the tax treaty between the two countries. Article 18 says lump sums "arising in a Contracting State and paid to a resident of the other Contracting State under a retirement benefit scheme" are "taxable only in the first-mentioned State". For super, the first-mentioned state is Australia. New Zealand gave up the right to tax it.

That covers both routes out: taking the money as cash, and moving it into KiwiSaver.

Doesn't the four year window apply?

Not to Australian super. The four year window, and the special rules that start once it closes, are how New Zealand taxes lump sums from other foreign schemes, such as a US 401(k) or IRA. Australian super sits outside that machinery altogether.

So it does not matter whether you arrived last year or twenty years ago. There is no deadline to beat before New Zealand starts taxing it, because New Zealand never does.

The same is not true in the other direction. IR1024 notes that a lump sum moved from another foreign scheme into an Australian one "is taxable".

Is it taxed in New Zealand while it grows?

No. The growth of most foreign investments held by a New Zealand resident is taxed each year under the foreign investment fund (FIF) rules. Australian super is exempt from them.

Inland Revenue's guide to those rules, IR461, lists the exemption under section EX 33 of the Income Tax Act 2007, for "Natural persons who have rights in certain Australian regulated superannuation schemes". So its growth is not taxed in New Zealand year by year.

Note the words "natural persons". The exemption is for super you hold yourself.

What about regular pension payments?

These follow a different rule, and it is the one part of the answer that depends on Australia.

Article 18 of the treaty begins by saying a pension paid to a New Zealand resident is taxable only in New Zealand. It then limits that at once: pension income arising in Australia "shall not be taxed in the first-mentioned State to the extent that such income would not be subject to tax in the other State if the recipient were a resident of that other State."

In plain terms, New Zealand does not tax a super pension that Australia would not tax if you still lived in Australia. The government's analysis of the treaty, appended to the report of the parliamentary committee that examined it, described the aim as "providing that pensions that would be exempt in the home country remain exempt in the country to which the recipient has retired."

So the question becomes what Australia taxes. The Australian Taxation Office (ATO): "Where you are receiving an account-based pension, you don't pay tax on the taxed element or tax-free component after you turn 60 years old."

For most people drawing an account-based pension from 60, that means no tax in either country. Two cases are different. A pension taken before 60 can be taxed in Australia, and so can the untaxed element of a pension at any age, which the ATO says is "most commonly in a public sector fund". Where Australia would tax a payment, the treaty no longer stops New Zealand from taxing it.

Can Australia still tax it?

Yes, for a lump sum. The treaty gives Australia the only right to tax a lump sum, and Australia uses it depending on your age.

The ATO's tables set it out. From 60, a lump sum from the taxed element of your super carries no tax, and the tax-free component, which generally comes from contributions you made from after-tax income, is not taxed. Before 60, the taxable component of a lump sum can be taxed.

When you can take the money out at all is a separate question, with its own rules on age and retirement.

What this guide does not tell you

It does not cover a US citizen or green card holder, who has a third country to answer to: see how the United States treats Australian super. It does not cover super held through a trust or a self-managed fund in any detail, whether your super affects NZ Super, or what happens to it when you die.

It also does not work out the tax on any particular payment. Your fund can tell you how your balance splits between its tax-free and taxable components, and that split is what Australia's rules turn on.

Where the published guidance runs out. We found no published ruling or Inland Revenue guidance that works through Article 18 for regular payments from Australian super: how much of a payment is taxable in New Zealand when Australia would tax part of it, and what a New Zealand resident enters in their tax return. Inland Revenue's own advice is that a double tax agreement "can affect how you're taxed", and that you or a tax professional will need to check. For a pension that starts before 60, or one paid from a public sector fund, that is the place to start.