Moves bring NZ closer to common market

CANBERRA - Finance Minister Bill English emerged from talks with Australian Treasurer Wayne Swan with a new retirement savings deal and a transtasman work programme that defies both countries' intense focus on the global financial crisis.

As well as the agreement enabling returning Kiwis to bring their superannuation back with them and the finalisation of a new tax treaty, their meeting also pushed plans to widen the doors to investment and to unravel red tape.

The latest moves towards a common economic market across the Tasman will be placed before Prime Ministers John Key and Kevin Rudd when they meet in Australia next month.

Mr English said that despite both countries' focus on the global crisis, New Zealand and the common market ambitions had not slipped below Canberra's horizon, with strong commitment continuing from the two prime ministers.

"Much of the work is unglamorous, official-level detail but quite significant for business," he said.

"There is no evidence of this slowing down, and [Mr Swan] was today quite enthusiastic about making more progress."

Mr English said issues requiring political solutions would continue to appear.

But he said it was very much business as usual between the New Zealand and Australian bureaucracies.

Both were dealing with issues that would develop similar rules to help business on both sides of the Tasman.

Most of the barriers that had caused a three-year impasse on a new investment protocol had been resolved, with the aim of reaching a deal that would significantly lift the trigger level for scrutiny of investment proposals.

Mr English said there was still some way to go, but the issues were being worked through effectively.

The goal was to produce a new protocol by the end of the year.

Mr English and Mr Swan also signed a memorandum of understanding on the plan to enable superannuation savings to be transferred across the Tasman, increasing the ability of workers to move between the two countries.

The plan, which still needs legislation passed by both parliaments, will especially benefit New Zealand because of the numbers of Kiwis who work across the Tasman, but who have been blocked from bringing home super savings locked in Australian funds until they are 65.

Savings transferred back to New Zealand must be lodged in KiwiSaver accounts until retirement, which attract a higher level of taxation than in Australia.

Mr English said that the new agreement would follow the principle that when capital was moved from one country to another it was subject - with some exceptions - to the host country's rules.

This would mean money transferred from Australia would be taxed at New Zealand rates.

"People will in the end make up their own minds about whether the tax treatment of returns on KiwiSaver is better or worse than the tax treatment of returns on the Australian scheme," he said. "That will depend on their personal circumstances, to a large extent."