CF 3Withdrawals from foreign superannuation scheme

1. This section applies when a New Zealand resident derives a benefit (a foreign superannuation withdrawal) that is not a pension or annuity and arises from an interest in a foreign superannuation scheme (the scheme) that—

2. is not a FIF superannuation interest and is acquired—
   1. when the person is a non-resident or is treated under a double tax agreement as being resident in a foreign country or territory:
   2. in a transaction referred to in subsection (21)(b) or (d) from a person who acquired the interest in the scheme when being a non-resident or when treated under a double tax agreement as being resident in a foreign country or territory:
3. is a FIF superannuation interest (a low-value FIF superannuation interest) from which the person does not have FIF income or loss because the person, although not acting as a trustee, does not meet the requirements of sections CQ 5(1)(d) and DN 6(1)(d) (which relate to when FIF income and FIF loss arise).

4. The foreign superannuation withdrawal is income of the person if the benefit is in the form of—

5. an amount derived by the person as a member or beneficiary of the scheme:
6. an interest of the person in the scheme, withdrawn for reinvestment as an interest of the person in a superannuation scheme in New Zealand:
7. an interest of the person in the scheme, outside Australia, withdrawn for reinvestment as an interest of the person in a superannuation scheme in Australia:
8. an interest of the person in the scheme withdrawn for reinvestment as an interest of another person in a superannuation scheme.

9. A foreign superannuation withdrawal is not income of the person under subsection (2)(d) if—

10. the benefit is an interest of the person in the scheme that is withdrawn on the death of the person or under a relationship agreement arising from an event (the relationship cessation) that occurs when,—
    1. for a marriage or civil union of the person, the marriage or civil union is dissolved or the person and the person’s spouse or civil union partner separate or begin to live apart (whether or not they continue to live in the same residence):
    2. for a de facto relationship of the person, the de facto relationship ends; and
11. immediately before the death or the relationship cessation, the person is a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory; and
12. the interest withdrawn is immediately reinvested as an interest, in a foreign superannuation scheme outside Australia, of another person who is—
    1. a spouse, civil union partner, or de facto partner of the person immediately before the death or the relationship cessation; and
    2. a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory.

13. A foreign superannuation withdrawal derived by a resident is subject to—

14. section CW 28B (Foreign superannuation withdrawal in initial period of residency), if the person—
    1. is a resident under section YD 1; and
    2. derives the foreign superannuation withdrawal in the exemption period referred to in subsection (6):
15. section CW 28C (Foreign superannuation withdrawal exceeding given amount), if the foreign superannuation withdrawal is derived in the person's assessable period referred to in subsection (8), to the extent to which the foreign superannuation withdrawal exceeds—
    1. the amount referred to in subsection (10) as the assessable withdrawal amount, if the person uses the schedule method; or
    2. the amount referred to in subsection (16) as the assessable withdrawal amount, if the person uses the formula method.

16. A person has an exemption period referred to in subsection (6) for an interest in the scheme, other than a low-value FIF superannuation interest, if the person—

17. does not have, before acquiring the interest, an exemption period for an interest in a foreign superannuation scheme; and
18. acquires the interest as a non-resident; and
19. owns the interest as a non-resident until a date (the exemption commencement), whether before or after the commencement of this Act, when the person becomes a New Zealand resident.

20. The period (the exemption period) in which a foreign superannuation withdrawal may be exempt income of the person under section CW 28B is the period from the exemption commencement to the earlier of—

21. the end of the period of 48 months beginning after the month in which the person meets the requirements of section YD 1(2) or (3) ignoring the rule in section YD 1(4):
22. the date on which the person becomes a non-resident again.

23. The part (the assessable withdrawal amount) of a foreign superannuation withdrawal that is treated as not being exempt income of the person depends on the total period (the assessable period) referred to in subsection (8) for the person and the interest in the scheme.

24. The assessable period for the person and a foreign superannuation withdrawal arising from an interest in the foreign superannuation scheme—

25. if the person is a non-resident when they acquire the interest, begins on the later of—
    1. the date when the person becomes, for the first time after acquiring the interest in the scheme, a New Zealand resident who owns the interest in the scheme:
    2. the end of the person's exemption period:
26. if the person is a resident who is treated under a double tax agreement as being resident in a foreign country or territory when they acquire the interest in the scheme, begins on the date when the person becomes, for the first time after acquiring the interest, a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory and who owns the interest in the scheme:
27. if the person is a resident when they acquire the interest and paragraph (ab) does not apply, begins when they acquire the interest:
28. ends on the date when the person derives the foreign superannuation withdrawal (the distribution time):
29. does not include a period in which the person is a non-resident.

30. The assessable withdrawal amount for a foreign superannuation withdrawal derived by the person is calculated for—

31. the schedule method under subsection (10), if paragraph (b) does not apply; or
32. the formula method under subsection (16), if—
    1. the scheme is a foreign defined contribution scheme; and
    2. the interest is not a low-value FIF superannuation interest; and
    3. the person has the information required for the application of the formula method; and
    4. the person derives no withdrawal, other than a pension or annuity, from the scheme before 1 April 2014; and
    5. the person has not used the schedule method for the interest in the scheme; and
    6. for a person who acquires the interest in the scheme of a spouse, civil union partner, or de facto partner by a transfer referred to in subsection (21)(d), the other person did not use the schedule method for the interest in the scheme; and
    7. the person chooses to use the formula method for the interest in the scheme.

33. The assessable withdrawal amount under the schedule method is calculated using the formula—

    $(super\; withdrawal\; -\; contributions\; left)\; \times \; schedule\; year\; fraction.$

    Where:

34. In the formula in subsection (10),—

35. super withdrawal is the amount of the foreign superannuation withdrawal:
36. contributions left is the lesser of the amount of the item super withdrawal and the total amount of recognised contributions under subsection (19) made in the assessable period before the distribution time, reduced, for each withdrawal (the earlier withdrawal), other than a pension or annuity, made in the assessable period before the distribution time, by an amount equal to the lesser of—
    1. the amount of the earlier withdrawal:
    2. the value of the item contributions left, immediately before the time of the earlier withdrawal:
37. schedule year fraction is the fraction given in schedule 33 (Default fractions of foreign superannuation withdrawals), column 2 of the row for which the entry in column 1 corresponds to the greater of 1 and the number of income years beginning—
    1. in the assessable period under subsection (8); and
    2. before the distribution time.

38. Under the formula method, the part (the distributed gain) of a foreign superannuation withdrawal that is treated as consisting of gains made by the scheme during the assessable period is calculated using the formula—

    $(super\; withdrawal\; \times \; calculated\; gains\; fraction)\; -\; other\; gains.$

    Where:

39. In the formula in subsection (12),—

40. super withdrawal is the amount of the foreign superannuation withdrawal:
41. other gains is the total amount of distributed gains referred to in subsection (12) for foreign superannuation withdrawals in the assessable period before the distribution time.

42. In the formula in subsection (12), calculated gains fraction is the greater of zero and the amount calculated using the formula—

    $(predistribution\; +\; withdrawals\; -\; value\; -\; contributions)\; ÷\; predistribution.$

    Where:

43. In the formula in subsection (14),—

44. predistribution is the value of the interest in the scheme immediately before the distribution time:
45. withdrawals is the total amount of foreign superannuation withdrawals from the interest in the scheme in the assessable period before the distribution time:
46. value is the value of the interest in the scheme at the beginning of the assessable period:
47. contributions is the amount of recognised contributions under subsection (19) made to the interest in the scheme in the assessable period before the distribution time.

48. The assessable withdrawal amount under the formula method is the amount calculated using the formula—

    $gain\; \times \; (grow\; rate\; -\; 1)\; \times \; tax\; rate\; \times \; (assessable\; years\; -\; 1)\; +\; gain.$

    Where:

49. In the formula in subsection (16), grow rate is the amount calculated using the formula—

    $(accrued\; total\; ÷\; value)\; (1\; ÷\; assessable\; years).$

    Where:

50. In the formulas in subsections (16) and (17),—

51. gain is the amount of the distributed gain referred to in subsection (12) for the foreign superannuation withdrawal:
52. tax rate is the tax rate referred to in schedule 6, table 1, row 1 (Prescribed rates: PIE investments and retirement scheme contributions):
53. assessable years is the greater of 1 and the number of tax years beginning in the assessable period and before the distribution time:
54. accrued total is the value of the interest in the scheme immediately before the distribution time, increased by the value of foreign superannuation withdrawals from the interest in the scheme in the assessable period before the distribution time, and reduced by the value of recognised contributions under subsection (19) made to the interest in the scheme in the assessable period before the distribution time:
55. value is the value of the interest in the scheme at the beginning of the assessable period.

56. The value of a payment to the scheme is taken into account in the formulas in subsections (10), (14), and (17) as a contribution (a recognised contribution) if the payment—

57. is made when the person is a New Zealand resident who is treated as a New Zealand resident under all applicable double tax agreements; and
58. is made by the person, by the person's employer, or for the benefit of the person; and
59. is required by the rules of the scheme; and
60. is subject to employer superannuation contribution tax or fringe benefit tax if made by the person's employer.

61. For the purposes of this section, if a person acquires, under an arrangement with a foreign superannuation scheme that provides for contributions to the superannuation scheme by or for the person, rights (benefit rights) in the foreign superannuation scheme to benefit as a member or beneficiary from distributions by the superannuation scheme, the person holds an interest in the foreign superannuation scheme under the arrangement for the period beginning when the person acquires benefit rights under the arrangement and ending when the arrangement ends.

62. In determining when a person who acquires rights in a foreign superannuation scheme acquires an interest in the foreign superannuation scheme,—

63. if none of paragraphs (b) to (d) apply, the person is treated as acquiring the rights when the first contribution is made to the superannuation scheme, in relation to the rights, by or for the person; or
64. if the person is converting existing rights of the person in another foreign superannuation scheme (the former scheme) to corresponding rights of the person in the superannuation scheme, the person is treated as acquiring the corresponding rights when the person acquired the rights in the former scheme; or
65. if the person is acquiring existing rights in the superannuation scheme from another person, other than by a transaction to which paragraph (d) applies, the person is treated as acquiring the existing rights when the person acquires the rights; or
66. if the person is acquiring existing rights in the superannuation scheme of a New Zealand resident (the former owner) as a surviving spouse, civil union partner, or de facto partner of the deceased former owner, or as a former spouse, civil union partner, or de facto partner of the former owner under a relationship agreement arising from the end of the marriage, civil union, or de facto relationship, the person is treated as—
    1. having owned the existing rights from the time the former owner acquired the existing rights; and
    2. having made all payments to the scheme that were made by or for the former owner; and
    3. having derived all distributions from the scheme that the former owner derived; and
    4. having been a New Zealand resident who is treated under no double tax agreement as being resident in a foreign country or territory and as having owned the existing rights during the assessable period of the former owner, at the time of the transfer, for the interest consisting of the rights; and
    5. continuing to own the existing rights from the time of the transfer.

67. If the assessable period for a person and an interest begins before 1 April 2014, this section overrides any provision of this Act that would otherwise quantify and allocate income of the person, from the part of the interest unaffected by withdrawals derived before 1 April 2014,—

68. for the period of ownership before 1 April 2014; and
69. not assessed for tax before 1 April 2014.

Notes

• Section CF 3: inserted, on 1 April 2014, by section 8 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
• Section CF 3(1): replaced (with effect on 1 April 2015), on 24 February 2016, by section 78(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(1): replaced (with effect on 1 April 2014), on 24 February 2016, by section 78(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(3): replaced (with effect on 1 April 2014), on 24 February 2016, by section 78(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(5): amended (with effect on 1 April 2015), on 24 February 2016, by section 78(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(8)(a): amended (with effect on 1 April 2014), on 24 February 2016, by section 78(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(8)(ab): inserted (with effect on 1 April 2014), on 24 February 2016, by section 78(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(8)(ac): inserted (with effect on 1 April 2015), on 24 February 2016, by section 78(7) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(9)(b)(ib): inserted (with effect on 1 April 2015), on 24 February 2016, by section 78(8) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(20): replaced (with effect on 1 April 2014), on 24 February 2016, by section 78(9) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21) heading: replaced (with effect on 1 April 2014), on 24 February 2016, by section 78(10) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21): amended (with effect on 1 April 2014), on 24 February 2016, by section 78(11) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21)(a): amended (with effect on 1 April 2014), on 24 February 2016, by section 78(12) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21)(b): amended (with effect on 1 April 2014), on 24 February 2016, by section 78(13) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21)(c): amended (with effect on 1 April 2014), on 24 February 2016, by section 78(14) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21)(d)(i): replaced (with effect on 1 April 2014), on 24 February 2016, by section 78(15) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21)(d)(iv): replaced (with effect on 1 April 2014), on 24 February 2016, by section 78(16) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
• Section CF 3(21)(d)(v): amended (with effect on 1 April 2014), on 24 February 2016, by section 78(17) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).