Kiwis to gain most from super portability - academic

The Australian Tax office has around A$17.7 billion in lost superannuation money, with a large proportion thought to belong to New Zealanders.

A new deal allowing Kiwis and Australians to take their retirement savings with them when they cross the ditch will be of greatest benefit to New Zealanders, says an academic.

After nearly three years in the pipeline, transtasman superannuation portability finally came into effect earlier this week.

It means New Zealanders who have money locked in Australian superannuation schemes can now transfer those funds back into participating KiwiSaver schemes, and vica versa.

Norman Gemmell, a finance expert at Victoria University, said New Zealanders had more to gain from the arrangement than Australians.

"There are greater numbers of Kiwis working long-term in Australia and the Australian government contributes comparatively more in subsidies to retirement savings for those working in Australia than the New Zealand government does for its workers," Gemmell said.

Kiwis working in Australia have to make compulsory super payments at a higher minimum contribution rate, meaning their retirement fund was typically bigger, Gemmell said.

The Australian Tax Office estimates there is about A$17.7 billion (NZ$21 billion) in 'lost accounts' in the Australian superannuation system, much of which is thought to belong to New Zealanders.

Chris Douglas, co-head of research for Morningstar Australasia, said it did not matter who gained most from the scheme.

"It's fair and right, regardless of who benefits most," he said.

Any money which came out back into KiwiSaver would be "just a drop in the bucket" of the whole Australian super industry, he said.

"There won't be a flood of money flowing back here into KiwiSaver but it's an appropriate piece of legislation."

Gemmell said super portability would make it easier for Kiwis to retire back to New Zealand but would not help solve the "serious labour market problem" of how to recruit older Australians to jobs in New Zealand.

"Given the number of people we lose to Australia each year, we need to find ways of recruiting people to come here."

Australians nearing retirement were unlikely to move to New Zealand because current rules mean they cannot keep paying into their Australian super fund while here.

"Australians aged say 55 who come to work in New Zealand are often reluctant to give up their Australian super contributions while they are here because they want to keep growing the pot back home, ready for a return to Australia when they retire," Gemmell said.

He added that there was now "a strong case" for New Zealand and Australia to follow super portability with mutual recognition of each country's imputation credits, something the Australian government has so far refused to support.

Imputation is a way for a company to pass on credits for tax it has paid on its profits, to its shareholders when it pays them dividends. The mechanism means shareholders do not have to pay "double tax".

"Investment is highly mobile across the Tasman making it desirable to have mutual recognition of both superannuation contributions and imputation credits," Gemmell said.

Douglas agreed and said he wanted to see consistency in the investment rules between the two countries.

"As a New Zealander, I don't get the franking benefits (another name given to imputation) of investing into an Australian company. I don't think that's fair."

The New Zealand government approved the portability legislation in September 2010 but Australia took until last month to firm up its side of the deal.

KiwiSaver providers were caught off guard scrambling to get ready in time for the scheme's July 1 introduction because they had expected more time to prepare.