New Zealand

By SARAH BLAKE
MANAGER, BUSINESS ADVISORY
Sarah.Blake@williambuck.com

changing lives

Individuals can currently access their super in one of three ways;

  • once they turn 65
  • once they reach their preservation age and retire
  • under the transition to retirement income stream (TRIS) rules, while continuing to work

While in pension phase, income and capital gains currently earned by a superannuation fund is tax free where the minimum pension has been withdrawn by the end of the financial year.
The minimum pension is based on a percentage of the opening balance of the pension account each year, and the minimum requirements increase in accordance with age as follows;

Age Minimum Withdrawal
Under 65 4%
65-74 5%
75-79 6%
80-84 7%
85-89 9%
90-94 11%
Over 95 14%

Those who are drawing a TRIS are also restricted to a 10% cap on withdrawals each year.

From 1 July 2017 a cap of $1.6m on the total balance an individual can transfer into the tax-free pension phase will be introduced. Subsequent earnings on these balances will be capitalised and included in the tax-exempt component of the fund.

Where an individual’s balance over $1.6m, they will be able to maintain the excess amount in an accumulation phase account (where earnings will be taxed at the concessional rate of 15%). Members who currently have a pension account with a balance above $1.6m will be required to revert the excess back to an accumulation account at 1 July 2017.

A tax on amounts that are transferred in excess of the $1.6m cap (including earnings on these excess transferred amounts) will be applied, similar to the tax treatment that applies to excess non-concessional contributions.

A TRIS is an income stream (pensions) paid to members who have reached their preservation age (currently 56) but who have not yet retired. From 1 July 2017 the tax exemption on income earned on assets supporting a TRIS will be removed. Additionally the rule that allows individuals to treat certain superannuation income stream payments as tax free lump sums will be removed.

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