Key Takeaways:
- To qualify for NZ Super, most people need to have lived in New Zealand for 20 years since turning 20, with at least 5 years after the age of 50
- Residency requirements vary depending on birthdate, and at least 5 years of residency must be after the age of 50
- Holding New Zealand citizenship and/or tax residency is not enough to qualify for NZ Super
- Qualifying for another country’s state pension may affect NZ Super entitlement
- Returning Kiwis face strict residency and pension rules that can affect when and how they receive NZ Super
- Understanding tax rules is crucial to avoid losing money unnecessarily
Introduction to NZ Super Eligibility
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 5 of those years must be after the age of 50. It is essential to note that simply holding New Zealand citizenship and/or tax residency is not enough to qualify for NZ Super. One must be "ordinarily resident" in New Zealand or in a list of qualifying countries for the relevant number of years. Keeping records of residency history is strongly recommended to avoid any potential issues.
Residency Requirements and Qualifying Countries
The residency requirements for NZ Super can be complex, and it is crucial to understand the rules to ensure eligibility. For example, if an individual has lived in other countries, they should check the relevant rules on Work & Income’s website to determine their eligibility. Additionally, returning Kiwis who have lived in countries without a social security agreement with New Zealand may still qualify for NZ Super once they return and complete the necessary years. However, this could mean receiving it at 70 or older. Until then, they typically work or live off foreign investments.
Social Security Agreements and NZ Super Entitlement
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 to the NZ Super entitlement. For instance, if an individual uses time living in Australia to meet New Zealand’s residence requirement, their NZ Super entitlement is tied to Australia’s means-tested Age Pension. This can mean they won’t receive NZ Super until the age they would have qualified for the Australian pension, which is now 67 for many people. However, the rules can be complicated, and it is essential to seek professional advice to understand the specific situation.
Tax Implications for Returning Kiwis
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, 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 their marginal tax rate. This can be an encouragement to bring overseas investments home within four years. Regular payments from private foreign schemes are taxed as income in New Zealand, and the four-year exemption does not apply. Understanding the tax situation is crucial to avoid losing money unnecessarily.
Importance of Seeking Professional Advice
Finally, the NZ Super eligibility and related tax rules are complex and can change. If an individual thinks they could be affected, it is essential to seek detailed professional advice. The rules can be confusing, and it is crucial to understand the specific situation to ensure eligibility and avoid any potential issues. By seeking professional advice, individuals can navigate the complex rules and make informed decisions about their NZ Super entitlement and tax situation. This can help them avoid losing money unnecessarily and ensure a smooth transition into retirement.
