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Foreign superannuation are funds created outside of New Zealand to provide retirement benefits to individuals.

Lump sum withdrawals and transfers of foreign superannuation are taxed through 2 different methods, the schedule method or the formula method. You can choose to use the method that best suits you.

Periodic foreign superannuation payments will generally be taxed under the foreign investment fund rules instead.

Tax begins after 4 years

A 4 year tax exemption can apply to lump sums. You will not have to pay tax in the exemption period for the lump sum you receive.

The exemption period starts from the date you become a New Zealand tax resident and runs for 2 years.

The exemption period is not available for foreign super acquired while you were a New Zealand tax resident.

If you become a non-resident within 4 years of becoming a tax resident, the exemption only applies from the date you became a resident until when you became a non-resident again.

Schedule method

The schedule method is the default option when calculating lump sum foreign superannuation.

Under this method you pay tax on a percentage of the lump sum. The percentage varies depending on how long you've been a New Zealand tax resident.

Formula method

The formula method is complex. We recommend getting advice from a tax agent to use it.

Under this method you are taxed on the actual gains of your foreign superannuation interest. This tax is between when your 4 year exemption expires and the date you get the lump sum.

Australian transfers are not taxed

When you withdraw or transfer a lump sum from an Australian scheme into New Zealand, the sum is not taxable.