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Inland Revenue

Tax Policy

Exemption period

Clause 8

Issue: Pre-1 April 2014 migrants should receive an exemption period


(Ernst & Young, Financial Services Council, Offen Advisors Limited, Owens Tax Advisors Limited)

Submitters are concerned that under the current drafting, it is not clear that residents who arrived before 1 April 2014 would be eligible for an exemption period. They request clarification that once the new provisions apply, they would also be capable of applying to all persons who held foreign superannuation interests as at 1 April 2014.


Officials consider that the existing drafting is sufficiently clear that taxpayers who became New Zealand resident before 1 April 2014 would have the exemption period available to them.

The proposed legislation applies to foreign superannuation withdrawals derived on or after 1 April 2014. It then works backward to calculate a taxpayer’s assessable period and thus, their exemption period. This means that for all withdrawals made on or after 1 April 2014, the taxpayer would have an exemption period available to them if they meet the other conditions.


That the submission be noted.

Issue: Parity between transitional residents and other residents


(Charter Square Services, Ernst & Young)

The same restrictions that apply to transitional residents should also apply to other residents in respect of the exemption period (Charter Square Services).

Alternatively, the proposals should not have specific rules for transitional residents. Rather, the exemption period should apply to all taxpayers (Charter Square Services).

The period of transitional residence may be slightly longer than 48 months in some cases, as the 48 months runs from the month in which an individual obtains a permanent place of abode or exceeds 183 days’ presence in New Zealand within a 12-month period. This should also apply for other new residents who are not transitional residents to achieve parity of treatment (Ernst & Young).


The current law provides for a four-year exemption for new migrants who meet the criteria for being a transitional resident. However, migrants who have been away from New Zealand for less than 10 years are not eligible to be a transitional resident. In addition to this, migrants who receive Working for Families tax credits during their transitional residence period will generally cease to be transitional residents.

A design feature of the new rules is to extend the four-year exemption to all taxpayers with interests in foreign superannuation schemes that were acquired while they were overseas. This will simplify the rules and ensure that everyone will receive an exemption period regardless of whether they are in receipt of Working for Families tax credits or were non-resident for less than 10 years.

The four-year exemption period that is proposed for residents who do not meet the transitional migrant criteria is intended to broadly match the rules for transitional residents.

However, the current drafting may lead to differences in the timing of the exemption period.

In particular, one submitter states that when a transitional resident receives Working for Families tax credits, they then cease to be a transitional resident. This submitter states that the exemption period would then be cut short for such a taxpayer. There is no such restriction for non-transitional residents who receive Working for Families tax credits (Charter Square Services).

This is not the policy intention. Rather, when a transitional resident ceases to be transitional resident part-way during their transitional residence period, their exemption period should still continue for the full 48 months. This is discussed in further detail in “Issue: Ceasing to be a transitional resident and the impact on the exemption period”.

Officials consider that the exemption period available to non-transitional residents should be aligned with the exemption period that applies to transitional residents.

As such, it is recommended that the provision in the transitional residents rules that may result in a transitional residence period of slightly longer than 48 months should also be available to non-transitional residents in relation to their exemption period.


That the submission be accepted, subject to officials’ comments.