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Superannuation Legislation Amendment (New Zealand Arrangement) Bill 2012

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2010-2011-2012

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

HOUSE OF REPRESENTATIVES

 

 

 

Superannuation Legislation Amendment (New Zealand Arrangement) Bill 2012

 

 

 

EXPLANATORY MEMORANDUM

 

 

 

 

(Circulated by the authority of the

Minister for Employment and Workplace Relations and Minister for Financial Services and Superannuation, the Hon Bill Shorten MP)

 



Table of contents

Glossary.............................................................................................................. 1

General outline and financial impact............................................................ 3

Chapter 1               Portability of superannuation between Australia and New Zealand         5

Index................................................................................................................. 23

 



The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

Arrangement

Arrangement between the Government of Australia and the Government of New Zealand on Trans-Tasman Retirement Savings Portability  

ITAA 1997

Income Tax Assessment Act 1997

S(GCLIE) Act

Superannuation (Government Co-contribution for Low Income Earners) Act 2003

SIS Regulations

Superannuation Industry (Supervision) Regulations 1994

TAA 1953

Taxation Administration Act 1953



Portability of superannuation between Australia and New Zealand

Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) and other Acts to introduce an Arrangement that allows individuals to move their retirement savings between Australia and New Zealand.

Date of effect The amendments commence on the day the Arrangement between the Government of Australia and the Government of New Zealand comes into force for Australia. 

Proposal announced This measure was jointly announced by the Treasurer and the New Zealand Minister for Finance in the Treasurer’s Media Release No. 084 of 16 July 2009. 

Financial impact The measure has a positive revenue impact of $6.8 million over four years to 2016-17.

Human rights implications :  This Bill does not raise any human rights issue.  See Statement of Compatibility with Human Rights — Chapter 1, paragraphs 1.76 to 1.96.

Compliance cost impact :  The measure is expected to have a medium overall compliance cost impact, comprised of a medium implementation impact and a low increase in ongoing compliance costs .

 



Outline of chapter

          Schedule 1 to this Bill amends the Income Tax Assessment Act 1997 (ITAA 1997) and other Acts to allow individuals to move their retirement savings between Australia and New Zealand.

          All references in this chapter are to the ITAA 1997 unless otherwise specified.

Context of amendments

1.2                   The Australian Government is committed to the closest possible relations between Australia and New Zealand.  The year 2013 is the thirtieth anniversary of the Closer Economic Relations Trade Agreement which, together with the Single Economic Market agenda, has brought down trade barriers, reduced costs for business, encouraged investment and created jobs and economic growth for both Australia and New Zealand.

1.3                   Australians and New Zealanders may move freely across the Tasman Sea and can live and work in either country.  New Zealanders living in Australia can contribute to Australian superannuation funds. 

          The current superannuation laws do not allow Australians and New Zealand citizens living in Australia, who leave Australia  indefinitely, to either access their superannuation benefits on their departure (prior to reaching preservation age) or to move their benefits to a superannuation fund in another country.

          On 16 July 2009, the Australian Treasurer and the New Zealand Minister of Finance signed an Arrangement between the Government of Australia and the Government of New Zealand on Trans-Tasman Retirement Savings Portability (the Arrangement).  The Arrangement establishes a scheme to enable Australians and New Zealanders to transfer their retirement savings when they move between Australia and New Zealand, while preserving the integrity of the retirement savings systems of both countries.

          The Arrangement is intended to enhance the development of a seamless trans-Tasman labour market and supports progress towards a single economic market, to which the two Governments are jointly committed through the Australia New Zealand Closer Economic Relations Trade Agreement.

          The Arrangement is intended to apply to individuals who emigrate between the two countries and intend to stay indefinitely or permanently in the host country. 

          For example, individuals with an interest in an Australian superannuation fund may transfer their superannuation benefits to a New Zealand KiwiSaver scheme when they move to New Zealand. 

          Similarly, individuals in New Zealand who hold retirement savings in a KiwiSaver account will be able to transfer those savings to an Australian superannuation fund when they move to Australia.

          The Arrangement assists Australians and New Zealanders to streamline their financial affairs when they cross the Tasman, consolidate their retirement savings in their country of residence and avoid paying unnecessary fees and charges on multiple accounts held in the two countries. 

          The Arrangement may also assist funds by removing small or inactive accounts, belonging to former members now living in New Zealand, from the Australian superannuation system.

Details of the Arrangement

          Key features of the Arrangement include:

•        individuals may transfer their retirement savings between an Australian complying superannuation fund and a New Zealand KiwiSaver scheme;

•        the transfer of retirement savings is voluntary for members, and voluntary for funds to accept the transferred savings;

•        retirement savings are to be transferred with minimal compliance and administration costs;

•        New Zealand-sourced retirement savings transferred to Australia are subject to the non-concessional contributions cap on their initial entry into the Australian superannuation system;

•        the transferred savings are generally subject to the rules of the host country, with limited and specified exceptions (see paragraphs 1.14 to 1.17); and

•        the transferred savings must be separately identifiable within the account established in the host country, to allow the application of the specified source country rules (see paragraphs 1.14 to 1.17).

          Australian-sourced retirement savings held in KiwiSaver schemes:

•        may not be withdrawn to purchase a first home;

•        may be accessed when the individual reaches age 60 and satisfies the Australian definition of retirement at that age; and

•        may not be transferred to a third country.

          New Zealand-sourced retirement savings held in Australian superannuation funds:

•        may only be transferred to and held in complying superannuation funds that are regulated by the Australian Prudential Regulation Authority;

•        may not be transferred to or held in self-managed superannuation funds;

•        may not be transferred to a third country; and

•        may be accessed when the member reaches the age of retirement as defined in the New Zealand Superannuation and Retirement Income Act 2001 (currently 65). 

          The Arrangement specifies that New Zealand-sourced retirement savings held in Australian superannuation funds may not be accessed under the conditions of release for retirement or attaining preservation age as defined in the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations), that is conditions of release 101 and 110 respectively of Schedule 1 to the SIS Regulations (see Example 1.4).

          The regulations may prescribe the preservation rules and conditions of release that apply to New Zealand-sourced amounts, consistent with the terms of the Arrangement.

          A key feature of the Arrangement is that New Zealand-sourced amounts held in Australian complying superannuation funds are generally subject to Australian tax and superannuation rules, consistent with the terms of the Arrangement (see Example 1.2). 

          Consequently, earnings on New Zealand-sourced amounts are taxed at Australian rates and are included in the taxable component of the member’s interest.  If the member later transfers the benefits to a KiwiSaver scheme, the earnings are included in the Australian-sourced amount. 

          A consequence of being subject to Australian superannuation rules is that New Zealand-sourced amounts held in Australian complying superannuation funds cannot be withdrawn to purchase a first home.  Australian superannuation legislation does not permit benefits to be withdrawn for this purpose. 

          Australian-sourced amounts held in KiwiSaver schemes are generally subject to New Zealand tax and superannuation rules, consistent with the terms of the Arrangement (see Example 1.6). 

Summary of new law

          Schedule 1 to the Bill amends the ITAA 1997 to implement the taxation treatment that applies to retirement savings transferred between Australia and New Zealand under the Arrangement. 

          Amounts may only be transferred between KiwiSaver schemes and Australian complying superannuation funds, consistent with the terms of the Arrangement.  A complying superannuation fund includes an eligible rollover fund.

          Amounts transferred from a KiwiSaver scheme to an Australian complying superannuation fund are treated as contributions made by the member for the member’s benefit. 

          The contributions are not taxed on their entry into the Australian superannuation system. 

          The contributions are non-concessional contributions and are subject to the non-concessional contributions cap on their initial entry into the Australian superannuation system, consistent with the terms of the Arrangement.  If the contribution also includes any Australian-sourced or returning New-Zealand sourced amounts, these amounts may be excluded from the cap in certain circumstances (see paragraphs 1.48 to 1.52).

          New Zealand-sourced retirement savings are included in the contributions segment of a superannuation interest and therefore form part of the tax free component of the interest.  Any Australian-sourced amount of the contribution may be included in the contributions segment in certain circumstances (see paragraphs 1.57 to 1.61).

          Amounts transferred from an Australian complying superannuation fund to a KiwiSaver scheme are not taxed on their exit from the Australian superannuation system.  The departing Australia superannuation payment does not apply to Australian and New Zealand citizens and to permanent residents. 

          Schedule 1 also permits the SIS Regulations to set out the superannuation treatment of retirement savings transferred under the Arrangement.  For example, the regulations may prescribe that contributions received from a KiwiSaver scheme and amounts transferred to a KiwiSaver scheme are subject to the contribution and payment standards respectively in the SIS Regulations. 

          Schedule 1 to the Bill also amends the Taxation Administration Act 1953 (TAA 1953) and the Superannuation (Government Co-contribution for Low Income Earners) Act 2003 (S(GCLIE) Act). 

Comparison of key features of new law and current law

New law

Current law

Members of Australian superannuation funds may transfer their superannuation benefits to a New Zealand KiwiSaver scheme.

There are no provisions to allow members of Australian superannuation funds who emigrate to transfer their superannuation benefits to a foreign superannuation fund. 

Members of KiwiSaver schemes may transfer their retirement savings to an Australian superannuation fund.

Retirement savings from foreign superannuation funds may be transferred into the Australian superannuation system. 

Contributions from KiwiSaver schemes are:

•        personal contributions of the individual;

•        non-concessional contributions and subject to the non-concessional contributions cap;

•        not taxed; and

•        included in the contributions segment of the superannuation interest. 

Retirement savings transferred from foreign superannuation funds are:  

•        personal contributions of the individual;

•        non-concessional contributions and subject to the non-concessional contributions cap; and

•        may be taxable in certain circumstances.

 

Benefits transferred to a KiwiSaver scheme are not taxed on their exit from the Australian superannuation system. 

No equivalent.

When benefits are transferred to a KiwiSaver scheme, the transferring trustee of the Australian fund must provide a statement in respect of the benefits to the KiwiSaver scheme provider and to the member.

No equivalent.

Detailed explanation of new law

Introduction of Trans-Tasman Retirement Savings Portability

          Schedule 1 sets out the tax provisions that apply to amounts transferred between Australian complying superannuation funds and New Zealand KiwiSaver schemes under the Arrangement.  The SIS Regulations may prescribe the superannuation treatment of these amounts.

          Division 312 inserts provisions about amounts paid between New Zealand KiwiSaver schemes and Australian complying superannuation funds.  [Schedule 1, item 2, section 312-1]

          Subdivision 312-A provides that the Division implements the Arrangement between the Governments of Australia and New Zealand on Trans-Tasman Retirement Savings Portability.   [Schedule 1, item 2, section 312-5]

Definitions

          A number of new definitions are inserted into the ITAA 1997.

          ‘KiwiSaver scheme’ has the meaning given by the KiwiSaver Act 2006 of New Zealand.  [Schedule 1, item 4, subsection 995-1(1)]

          KiwiSaver schemes were established in New Zealand in 2007 to help scheme members save for their retirement.   

          ‘KiwiSaver scheme provider’ has the meaning given by the KiwiSaver Act 2006 of New Zealand.  [Schedule 1, item 5, subsection 995-1(1)]

          Schedule 1 to the Bill also inserts definitions for ‘Australian-sourced amount’, ‘tax free component of an Australian-sourced amount’, ‘New Zealand-sourced amount’ and ‘returning New Zealand-sourced amount’ [Schedule 1, items 3 and 6 to 8, subsection 995-1(1)] The regulations may prescribe the meanings of these definitions.   

Contributions to Australian superannuation funds from KiwiSaver schemes

          Subdivision 312-B sets out the provisions relating to amounts contributed to Australian superannuation funds from KiwiSaver schemes (see Example 1.1).

Contribution to complying superannuation fund

          An amount transferred from a KiwiSaver scheme to a complying superannuation fund is treated as a personal contribution.  [Schedule 1, item 2, subsection 312-10(1)]

          Consequently, the contribution is:

•        not included in the assessable income of the receiving Australian superannuation fund [Schedule 1, item 2, note 1 to subsection 312-10(1)] ;

•        treated as a non-concessional contribution [Schedule 1, item 2, note 2 to subsection 312-10(1)] ; and

•        included in the contributions segment of the member’s superannuation interest. 

          Division 290 of the ITAA 1997 (Contributions to superannuation funds) does not apply to the contribution, consistent with the treatment of roll-over superannuation benefits between Australian funds.  [Schedule 1, item 2, subsection 312-10(2)]

          Consequently, the contribution is not deductible as a personal contribution under Subdivision 290-C of the ITAA 1997 and is not eligible for a spouse contribution offset under Subdivision 290-D.

          Section 295-200 and Subdivision 305-B of the ITAA 1997 do not apply to the contribution.  [Schedule 1, item 2, subsection 312-10(2)]

          Subsection 312-10(2) clarifies that the contribution is not subject to the tax arrangements that may, in certain circumstances, apply to amounts transferred from foreign superannuation funds.  That is, the contribution, or part of the contribution, is not included in the assessable income of the receiving Australian superannuation fund as a transfer from a foreign superannuation fund.

Non-concessional contributions

          The contribution is treated as a non-concessional contribution on its initial entry into the Australian superannuation system.  As such, it is subject to the non-concessional contributions cap under Subdivision 292-C of the ITAA 1997.  Contributions that exceed the non-concessional contributions cap (worked out under section 292-85 of the ITAA 1997) are liable to the excess non-concessional contributions tax.

          The regulations may prescribe that the contribution is subject to the contributions standards in the SIS Regulations, including the requirement for fund trustees to reject a single contribution that exceeds the non-concessional contributions cap.

          Australian-sourced and returning New Zealand-sourced amounts of the contribution may be excluded from the non-concessional contributions cap, as these amounts may have already been counted towards the cap in the year in which they were first contributed to an Australian superannuation fund.

          In order for these amounts to be excluded from the non-concessional contributions cap, the receiving Australian fund trustee must be advised of any Australian-sourced or returning New Zealand-sourced amounts of the contribution.  The regulations may prescribe that the KiwiSaver scheme provider or the member may give this information to the receiving fund’s trustee.  [Schedule 1, item 2, subsection 312-10(3)]

          The note to the subsection clarifies that the returning amounts of the contribution are excluded from non-concessional contributions, and the balance of the contribution is included in non-concessional contributions.  [Schedule 1, item 2, note to subsection 312-10(3)]

          Information about amounts previously contributed to an Australian complying superannuation fund is provided to the KiwiSaver scheme provider and to the member on the statement about benefits paid to KiwiSaver schemes (see paragraphs 1.66 - 1.69).  This information assists the KiwiSaver scheme provider or the member to provide evidence of the returning amounts’ status to the receiving fund’s trustee, so that the amounts are not subject to the contributions cap again (see Examples 1.3, 1.5 and 1.7). 

          The exclusion of these amounts may reduce the amount of the contribution that is subject to the non-concessional contributions cap.

Assessable income and capital gains

          The contribution is non-assessable non-exempt income of the member.  [Schedule 1, item 2, subsection 312-10(4)]

          This tax treatment is consistent with the treatment of roll-over superannuation benefits between Australian superannuation funds (section 306-5 of the ITAA 1997). 

          The contribution is not subject to capital gains tax on entry into the Australian superannuation system.  [Schedule 1, item 2, subsection 312-10(5)]

          This tax treatment is consistent with the treatment of contributions to a superannuation fund.

Components of a superannuation interest

          A New Zealand-sourced amount and any tax free component of an Australian-sourced amount of the contribution are included in the contributions segment of the member’s superannuation interest in the fund.  [Schedule 1, item 2, paragraphs 312-10(6)(a) and (b)]  

          The effect of this provision is that these amounts form part of the tax free component of the member’s interest in the Australian superannuation fund.  The tax free component will be taken into account in working out the components of any benefits subsequently paid from the member’s interest.

          In order for these amounts to be included in the contributions segment, the receiving Australian fund trustee must be advised of the New Zealand-sourced amount and any tax free component of an Australian-sourced amount of the contribution.  The regulations may prescribe that the KiwiSaver scheme provider or the member may give this information to the receiving fund’s trustee.  [Schedule 1, item 2, subsection 312-10(6)]

          The note to the subsection 312-10(6) clarifies that the New Zealand-sourced amount and any tax free component of an Australian-sourced amount of the contribution are included in the contributions segment and form part of the tax free component of the member’s interest.  The balance of the contribution is excluded from the contributions segment and is included in the taxable component.  [Schedule 1, item 2, note to subsection 312-10(6)]

          Information about the tax free and taxable components of the member’s former interest in an Australian superannuation fund is provided to the KiwiSaver scheme provider and to the member on the statement about benefits paid to KiwiSaver schemes (see paragraphs 1.66 - 1.69).  This information assists the KiwiSaver scheme provider or the member to provide evidence of any tax free component of an Australian-sourced amount to the receiving fund’s trustee so the tax free component maintains its status in the member’s current interest (see Example 1.7). 

Example 1.1  

Stanley, aged 35, lives in New Zealand and has accumulated NZ$200,000 in his KiwiSaver scheme account.  Stanley decides to move to Australia indefinitely and transfer his KiwiSaver scheme savings to an Australian complying superannuation fund. 

Stanley’s KiwiSaver contributions into his Australian fund are treated as a non-concessional contribution and are subject to the current Australian annual non-concessional contribution cap of AU$150,000.  However, the Australian rules allow Stanley to bring forward the next two years’ worth of contributions, allowing a maximum transfer of AU$450,000.  This allows Stanley to transfer all his KiwiSaver scheme savings into Australia’s superannuation system. 

Stanley’s KiwiSaver scheme savings are not taxed on their entry into the Australian superannuation system and form part of the tax free component of his interest in his Australian superannuation fund.  They are tagged within his account as being New-Zealand-sourced. 

Example 1.2  

Stanley’s New Zealand-sourced savings in his Australian superannuation fund savings are subject to Australian taxation rates.  Earnings on the New Zealand-sourced savings are included with his Australian-sourced amounts (for example, superannuation guarantee contributions from his employer) and form part of the taxable component of his interest. 

His New Zealand-sourced savings are, for the most part, also subject to Australian superannuation rules, although specified New Zealand source country rules apply. 

A key source country rule is that Stanley is not able to access his New Zealand-sourced savings until he reaches the KiwiSaver age of retirement of 65 years.  This is later than the preservation age (between 55 and 60) and retirement age (60) in Australia. 

Stanley is also unable to use his New Zealand-sourced savings to purchase a first home while they are held in his Australian superannuation fund, or to transfer his New Zealand-sourced savings to a self-managed superannuation fund or to a third country.

Example 1.3  

After ten years in Australia, Stanley considers moving back to New Zealand.  He would be able to transfer all his accumulated savings to a KiwiSaver scheme account.  The trustee of his transferring Australian fund would provide the receiving KiwiSaver scheme provider, and Stanley, with a statement about the transferred benefits, including information about his contributions (concessional or non-concessional) and the components (tax free or taxable).

Upon their transfer to the KiwiSaver scheme, Stanley’s Australian superannuation benefits would be tagged within his account as being Australian-sourced. 

Example 1.4  

Stanley remains in Australia, reaches his Australian preservation age of 60 and decides to retire.  He can only access his Australian-sourced savings upon his retirement, as his New Zealand-sourced savings must remain preserved in the fund until the higher KiwiSaver age of retirement of 65 years.

Superannuation benefits paid to KiwiSaver schemes from Australian superannuation funds

          Subdivision 312-C sets out the provisions relating to superannuation benefits paid to KiwiSaver schemes from Australian superannuation funds (see Example 1.5).

          A superannuation benefit paid to a KiwiSaver scheme provider by the trustee of an Australian complying superannuation fund in respect of a member is non-assessable non-exempt income of the member.  [Schedule 1, item 2, section 312-15]

          This tax treatment is consistent with the treatment of roll-over superannuation benefits between Australian superannuation funds (section 306-5 of the ITAA 1997). 

          The regulations may prescribe the circumstances in which members of Australian superannuation funds may transfer their benefits to a KiwiSaver scheme. 

Example 1.5  

Silpa, aged 35, is an Australian citizen currently living in New Zealand.  During her working life in Australia she accumulated AU$20,000 in her Australian complying superannuation fund.  Silpa has no intention of returning to Australia and would like to transfer her Australian superannuation benefits into her KiwiSaver scheme account in New Zealand. 

The trustee of Silpa’s transferring Australian fund provides the receiving KiwiSaver scheme provider, and Silpa, with a statement about the transferred benefits, including information about her contributions (concessional or non-concessional) and the components (tax free or taxable). 

Upon their transfer to the KiwiSaver scheme, the savings are tagged within Silpa’s account as being Australian-sourced. 

Example 1.6  

Silpa’s Australian-sourced savings are subject to New Zealand taxation rates, and are for the most part subject to New Zealand superannuation rules, although several specified Australian source country rules apply. 

A key source country rule is that Silpa may access her Australian-sourced savings on retirement at or after age 60.  This is currently earlier than the KiwiSaver age of retirement of 65 years. 

Silpa is unable to use her Australian-sourced savings to purchase a first home while the savings are held in a KiwiSaver scheme, or to transfer her Australian-sourced savings to a third country. 

Example 1.7  

After fifteen years in New Zealand, Silpa decides to return to Australia and transfer all her accumulated savings to an Australian complying superannuation fund. 

Silpa is able to provide the receiving Australian trustee with the statement from her previous Australian superannuation fund to confirm that part of her Australian-sourced savings were previously counted towards the non-concessional contributions cap.  This amount is not counted again towards the non-concessional contributions cap.  Silpa’s New Zealand-sourced savings, and the balance of her Australian-sourced savings, are subject to the non-concessional contributions cap.

The statement also confirms that part of Silpa’s Australian-sourced savings was included in the tax free component of her former interest.  This amount is included in the contributions segment (and the tax free component) of her new Australian interest, along with her New Zealand-sourced savings.  The balance of her Australian-sourced savings is included in the taxable component of her new interest. 

Example 1.8  

If Silpa had remained in New Zealand and retired on reaching age 60, she could only access her Australian-sourced savings.  Silpa’s New Zealand sourced savings must remain preserved in the scheme until the higher KiwiSaver age of retirement of 65 years.

Statements about benefits paid to KiwiSaver schemes

          Schedule 1 amends the TAA 1953 to insert a provision requiring the trustee of an Australian superannuation fund to provide a statement to a KiwiSaver scheme provider and to the member in respect of the member’s benefits paid to the KiwiSaver scheme.  [Schedule 1, item 10, section 390-12 of the TAA 1953]

          The transferring trustee must give the statement to the receiving KiwiSaver scheme provider within seven days after the payment of the benefit, and give the statement to the member within 30 days after the payment of the benefit.  The statement must be in the approved form.  [Schedule 1, item 10, subsections 390-12(2) and (3) of the TAA 1953]

          The approved form may require the statement to contain information about contributions made to the fund in respect of the member, information about the tax free and taxable components of the benefit, and other information relating to the benefit.  [Schedule 1, item 10, subsections 390-12(4) and (8) of the TAA 1953]

          The statement provides information to the KiwiSaver provider and to the member about the transferred benefits.  This information assists the KiwiSaver scheme provider or the member to provide evidence of any returning amounts’ tax status to a receiving fund’s trustee, should these amounts re-enter the Australian superannuation system.  For example, the statement would confirm whether the amounts were previously counted towards the non-concessional contributions cap, and whether the amounts were included in the taxable or tax free components of the interest (see Examples 1.3, 1.5 and 1.7). 

Superannuation co-contribution for low income earners

          The contribution is not an eligible personal superannuation contribution for the purposes of receiving the Government co-contribution for low income earners [Schedule 1, item 9, subparagraph 7(1)(c)(iia) of the S(GCLIE) Act] .  This provision is consistent with the treatment of a superannuation lump sum paid from a foreign superannuation fund to a complying superannuation fund.

Application and transitional provisions

          The amendments made by Schedule 1 apply to amounts transferred between complying superannuation funds and KiwiSaver schemes on or after the Arrangement takes effect.  [Schedule 1, item 12]

          The amendments made by this Schedule apply only to amounts transferred under the Arrangement.  They do not apply to amounts transferred before this Arrangement commences, or to amounts transferred under circumstances that fall outside of this Arrangement, or to amounts transferred between schemes or funds other than KiwiSaver schemes and Australian complying superannuation funds.

          The Minister will announce when the Arrangement comes into force for Australia by notice in the Gazette .

          The Arrangement comes into force no sooner than the first day of the second month following the month in which the two Governments have exchanged notes informing each other that their respective constitutional or legislative matters necessary to give effect to the Arrangement have been fulfilled.

Consequential amendments

          Contributions to Australian superannuation funds from KiwiSaver schemes, and superannuation benefits paid to KiwiSaver schemes from Australian funds, are included in the list of non-assessable non-exempt income provisions in section 11-55 of the ITAA 1997.  [Schedule 1, item 1, section 11-55]

          Section 390-12 is included in the provision about providing information in a statement to an individual or the trustee of the individual’s estate.  [Schedule 1, item 11, paragraph 390-15(1)(a) of the TAA 1953]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Portability of superannuation between Australia and New Zealand

1.76               This Bill is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

1.77               Schedule 1 to this Bill amends the ITAA 1997 and other Acts to implement an Arrangement that allows individuals to move their retirement savings between Australia and New Zealand.

1.78               On 16 July 2009, the Governments of Australia and New Zealand signed an Arrangement on Trans-Tasman Retirement Savings Portability (the Arrangement).  The Arrangement establishes a scheme to enable Australians and New Zealanders to transfer their retirement savings when they move between Australia and New Zealand, while preserving the integrity of the retirement savings systems of both countries.

1.79               The Arrangement is intended to enhance the development of a seamless trans-Tasman labour market and supports progress towards a single economic market, to which the two Governments are jointly committed through the Australia New Zealand Closer Economic Relations Trade Agreement.

1.80               Key features of the Arrangement include:

•        individuals may transfer their retirement savings between certain superannuation funds and schemes in Australia and New Zealand;

•        the transfer of retirement savings is voluntary for members, and for funds to accept the transferred savings; and

•        transferred savings are generally subject to the tax and superannuation rules of the host country. 

1.81               Schedule 1 to the Bill implements the taxation treatment of the retirement savings transferred under the Arrangement. 

1.82               Broadly, the savings transferred between the two countries are not subject to tax on entry into, or exit from, the Australian superannuation system. 

1.83               New Zealand retirement savings transferred to Australian superannuation funds are subject to the non-concessional contributions cap on their initial entry into the Australian superannuation system, in the same way that contributions from resident fund members are subject to the cap.

1.84               The trustee of the transferring Australian superannuation fund must provide the receiving KiwiSaver scheme provider, and the member, with personal information about the member and details of the transferred savings.  The disclosure of this information is required to facilitate the transfer and to assist the member to obtain favourable tax treatment, should the transferred savings re-enter the Australian superannuation system.

Human rights implications

1.85               This Bill engages the following human rights: 

•        right to freedom of movement;

•        right to work and rights at work;

•        prohibition on interference with privacy; and

•        right to equality and non-discrimination.

Right to freedom of movement

1.86               The Bill engages and promotes the right to freedom of movement in Article 12 of the International Covenant on Civil and Political Rights. 

1.87               The Bill removes an impediment to labour mobility between Australia and New Zealand.  The impediment is the current inability of individuals to transfer their retirement savings when they move between Australia and New Zealand, resulting in those individuals holding retirement savings accounts in two countries.

Right to work and rights at work

1.88               The Bill engages and promotes the right to work and rights at work in Articles 6(1) and 7 of the International Covenant on Economic, Social and Cultural Rights. 

1.89               The Bill enhances the movement of labour between Australia and New Zealand by helping individuals streamline and consolidate their retirement savings in their country of residence.

Prohibition on interference with privacy

1.90               The Bill engages and promotes the prohibition on interference with privacy in Article 17 of the International Covenant on Civil and Political Rights. 

1.91               The disclosure of personal information and details of the member’s superannuation benefits is protected by the transferring trustee’s obligations under the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 , the Privacy Act 1988 and the National Privacy Principles under the Privacy Act.

Right to equality and non-discrimination

1.92               The Bill engages and promotes the right to equality and non-discrimination in Article 2(2) of the International Covenant on Economic, Social and Cultural Rights and Article 26 of the International Covenant on Civil and Political Rights.

1.93               Retirement savings from foreign superannuation funds may be transferred into the Australian superannuation system.  However, there are no provisions in the superannuation legislation to allow Australian and New Zealand citizens and permanent residents who emigrate to transfer their benefits to a foreign superannuation fund. 

1.94               The Bill allows Australian and New Zealand citizens and permanent residents of Australia to transfer their superannuation benefits between certain Australian and New Zealand funds and schemes.

1.95               As noted above, the Arrangement is intended to enhance the development of a seamless trans-Tasman labour market and supports progress towards a single economic market, to which the two Governments are jointly committed through the Australia New Zealand Closer Economic Relations Trade Agreement.

Conclusion

1.96               This Bill is compatible with human rights as it promotes the right to freedom of movement, the right to work and rights at work, the prohibition on interference with privacy and the right to equality and non-discrimination. 

Minister for Financial Services and Superannuation, the Hon Bill Shorten MP



Schedule 1:  Portability of superannuation between Australia and New Zealand

Bill reference

Paragraph number

Item 1, section 11-55

1.75

Item 2, section 312-5

1.33

Item 2, subsection 312-10(1)

1.40

Item 2, note 1 to subsection 312-10(1)

1.40

Item 2, note 2 to subsection 312-10(1)

1.40

Item 2, subsection-312-10(2)

1.42, 1.44

Item 2, subsection 312-10(3)

1.49

Item 2, note to subsection 312-10(3)

1.50

Item 2, section 312-10(4)

1.53

Item 2, section 312-10(5)

1.55

Item 2, subsection 312-10(6)

1.59

Item 2, note to subsection 312-10(6)

1.60

Item 2, paragraphs 312-10(6)(a) and (b)

1.57

Item 2, section 312-15

1.63

Item 2, section 312-1

1.32

Items 3 and 6 to 8, subsection 995-1(1)

1.38

Item 4, subsection 995-1(1)

1.35

Item 5, subsection 995-1(1)

1.37

Item 9, subparagraph 7(1)(c)(iia) of the S(GCLIE) Act

1.70

Item 10, subsections 390-12(4) and (8) of the TAA 1953

1.68

Item 10, section 390-12 of the TAA 1953

1.66

Item 10, subsections 390-12(2) and (3) of the TAA 1953

1.67

Item 11, paragraph 390-15(1)(a) of the TAA 1953

1.76

Item 12

1.71