Currently to qualify for NZ Super, most people need to have lived in New Zealand for 20 years since turning 20 if they were born on or after July 1, 1977. For those born earlier, the requirement ranges from 10 to 19 years, depending on their age. In all cases, at least five of those years must be after the age of 50.
You’ll need to be “ordinarily resident” here or in a list of qualifying countries for the relevant number of years. Simply holding New Zealand citizenship and/or tax residency isn’t enough. Keeping records of your residency history is strongly recommended.
Another issue that may arise is if you’ve qualified for another country’s state pension. You’ll still receive NZ Super, but the amount you receive from qualifying overseas government pensions is deducted from your NZ Super in most cases.
Returning Kiwis face strict residency and pension rules that can affect when and how they receive NZ Super. Photo / 123RF
Investments such as Australian Super or UK private pension schemes, don’t automatically reduce your NZ Super. The terminology can be confusing. Think of them like KiwiSaver, not a state pension like NZ Super. Understanding the rules is important. It’s impossible to spell them all out in a short article.
The largest group of people likely to retire back to New Zealand after working overseas are those returning from Australia. Our social security agreement with the Australian government adds complexity.
For example, if you use time living in Australia to meet New Zealand’s residence requirement, your NZ Super entitlement is tied to Australia’s means-tested Age Pension. This can mean you won’t receive NZ Super until the age you would have qualified for the Australian pension, now 67 for many people. But it’s complicated.
Returnees from countries without a social security agreement who haven’t met New Zealand’s residence requirement may still qualify for NZ Super once they return and complete the necessary years. This could mean receiving it at 70 or older. Until then, they typically work or live off foreign investments.
Anyone who has lived in other countries should check the relevant rules on Work & Income’s website here.
Returning Kiwis need to consider their tax situation in both countries very carefully. They can get a four-year exemption on lump sum withdrawals, or for transfers to KiwiSaver from most private foreign superannuation schemes. That is providing they qualify as transitional residents and haven’t been tax resident in New Zealand for at least 10 years.
After four years, when the exemption ends, these lump sums are usually taxed in New Zealand at your marginal tax rate. That’s an encouragement to bring your overseas investments home within four years.
Regular payments from private foreign schemes are taxed as income here and the four-year exemption does not apply. Understanding your tax situation is really important if you don’t want to lose money unnecessarily.
Finally, the NZ Super eligibility, and related tax rules are complex and they can change. If you think you could be affected, seek detailed professional advice.
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