Does my NZ KiwiSaver affect the Australian Age Pension?

Why doesn't Australia treat KiwiSaver as superannuation?

Because Australian social security law has its own definition of a superannuation fund, and a New Zealand scheme does not fit inside it.

The Department of Social Services puts it plainly. A superannuation fund for social security purposes is defined in section 9(1) of the Social Security Act 1991, and "superannuation funds that do not meet this definition, such as overseas funds, are treated as managed investments provided the person can access the funds."

That matters more than it first sounds. Australian superannuation gets a specific concession: while you are under Age Pension age, money sitting inside it is ignored by both the income test and the assets test. KiwiSaver never gets that concession. The concession belongs to the legal category "superannuation fund", and KiwiSaver is not in that category.

What does it mean to be assessed as a managed investment?

A managed investment is one of the things Australian social security law calls a financial investment. Financial investments count at their market value under the assets test. Under the income test they are deemed, which means Australia assumes they earn a set rate of income no matter what they actually earn.

So an accessible KiwiSaver balance gets treated much like a managed fund you hold in your own name. The balance counts as an asset, and a notional income is attributed to it.

Deeming rates and the test thresholds change from year to year, so this guide does not reproduce them. Services Australia publishes the current figures and those are the ones to use.

Does it count before you turn 65?

Generally no, because you cannot get at it.

The same passage from the Department of Social Services carries the other half of the rule: "If a person cannot access funds held in an overseas government or employer superannuation-like fund, for example because they do not meet a condition of release such as reaching a certain age, then the asset value is not assessed as a managed investment or deemed."

KiwiSaver is locked. Schedule 1, clause 4 of the KiwiSaver Act 2006 says a member "is not permitted to withdraw amounts from their KiwiSaver scheme before the date on which the member reaches the New Zealand superannuation qualification age", and is permitted to withdraw on and after that date. Section 7(1) of the New Zealand Superannuation and Retirement Income Act 2001 sets that age at 65.

There is a catch here that specifically affects New Zealanders who have moved to Australia. If you emigrate anywhere else, you can cash out your KiwiSaver a year after you leave. If you emigrate to Australia, you cannot. Clause 14B of the same Schedule takes that option away and replaces it with a transfer into an Australian complying superannuation scheme. Moving to Australia does not unlock your KiwiSaver early. It stays locked until you turn 65, or it moves into Australian super.

Whether you can access your own account is a question of fact about that account. The exceptions to the lock, such as serious illness, significant financial hardship, buying a first home, or a life-shortening congenital condition, sit outside the general rule described here.

Where this actually bites: the years between 65 and 67

KiwiSaver unlocks at 65. The Australian Age Pension does not start until 67. Services Australia states that "Age Pension age is 67 years or older. There are no plans to change this."

Those two years are the gap. From your 65th birthday your KiwiSaver becomes accessible, and an accessible overseas fund is assessed as a managed investment straight away. It does not wait for Age Pension age, because the rule that waits for Age Pension age is the superannuation rule, and KiwiSaver is not superannuation.

You cannot claim the Age Pension at 65, so this does not affect an Age Pension claim of your own. What it affects is any other income support payment you might be receiving at 65 or 66. In that situation an Australian super balance would still be ignored and your KiwiSaver would not.

What if my partner is under Age Pension age?

This is where the same gap turns up in a real Age Pension claim.

When one partner claims a payment, the other partner's assets are taken into account. The Department of Social Services sets out the concession clearly. Where the partner who is not on income support is less than age pension age, "ALL amounts in superannuation and roll-over investments owned by them are exempt from income and assets test assessment."

That exemption is written for superannuation. On the definition above, KiwiSaver is not superannuation, so a partner's accessible KiwiSaver is not covered by it and falls back to being a managed investment.

Picture how that plays out. One partner is 67 and claiming the Age Pension. The other is 65 or 66 and has a KiwiSaver balance. Had that money been in an Australian super fund it would have been exempt from the claiming partner's means test. As KiwiSaver, it is assessable.

One thing to be straight about: we are joining two published rules together here rather than quoting a single passage that deals with this exact situation. It follows from the definition, but it is worth putting to Services Australia against your own circumstances.

Does transferring my KiwiSaver to an Australian fund change this?

It changes the category, and the category is what the whole question turns on.

Clause 14B of the KiwiSaver scheme rules lets a member who has permanently emigrated to Australia have their whole accumulation transferred into an Australian complying superannuation scheme. Once the money sits in an Australian fund it is superannuation for social security purposes, the concession for people under Age Pension age applies to it, and the two-year gap closes.

Whether making that transfer is a good idea overall is a different question. It involves tax, fees, investment options, and the fact that in practice the move is hard to reverse. This guide does not try to answer that. It only records that the means test treatment of the money changes when the money changes country.

What this guide does not tell you

Services Australia does not appear to publish any guidance that names KiwiSaver. We looked and could not find a page or a ruling that mentions it directly. What is set out above is the general treatment of overseas funds, applied to KiwiSaver's own access rules. If you need certainty for your own situation, ask Services Australia and get the answer in writing.

There are also things this guide deliberately leaves alone, because each one deserves a proper answer rather than a passing sentence. It does not cover current deeming rates and test thresholds, the residence rules for claiming the Age Pension at all, the Social Security Agreement between New Zealand and Australia, how a KiwiSaver withdrawal is taxed on either side of the Tasman, or what New Zealand does with an Australian super balance.