New Zealand taxpayers transferring an overseas pension into a New Zealand scheme will receive confirmation from Inland Revenue in different ways, depending on how the tax on the transfer is handled. The tax position on an overseas pension transfer depends on the Assessable Withdrawal Amount, or AWA. This is the taxable portion of the transfer.
From 1 April 2026, people transferring qualifying overseas pension funds to certain New Zealand superannuation schemes can elect to have the New Zealand scheme pay the tax due on the transfer on their behalf. Inland Revenue refers to this as the “scheme pays” option.
Where “scheme pays” is used, the New Zealand scheme withholds Transfer Scheme Withholding Tax from the AWA and pays it directly to Inland Revenue. Inland Revenue’s guide states that the rate is a flat 28%, charged on the amount calculated under the schedule or formula method. If correctly paid, the tax is final and does not need to be included in the person’s end-of-year tax return.
This also changes how taxpayers will hear from Inland Revenue. If scheme pays is used, or if the transfer is exempt, the transfer will not appear in myIR. Instead, Inland Revenue will send a letter confirming how the overseas pension transfer has been treated for tax purposes. The letter confirms that the transfer has been reported, that scheme pays has been applied where relevant, and that the tax has already been dealt with.
For people who qualify for the temporary tax exemption on foreign income, the letter will confirm that no tax has been deducted because the person is still within their exemption period. Inland Revenue says transitional tax residents can be temporarily exempt from paying tax on most types of overseas income, including withdrawals from foreign superannuation schemes.
The process is different where the individual pays the tax personally. In those cases, no confirmation letter is expected because the transfer information should appear in myIR once the New Zealand scheme has reported the transfer and Inland Revenue has processed it. The amount should then appear in the taxpayer’s income summary and be pre-populated into their end-of-year assessment or IR3 return.
This is an important practical change. Previously, taxpayers using the individual pays method needed to return the AWA in their IR3 as overseas income. The latest guidance indicates that, once the New Zealand scheme’s report has been processed, the amount should already be visible in myIR and taxpayers should not need to enter it again manually.
Taxpayers should still check the transfer details, the AWA calculation, and the method being used. The choice between scheme pays and individual pays can affect the final tax outcome, especially where a person’s marginal tax rate is lower than 28%, they have tax losses available, or the transfer may create provisional tax implications.
Anyone transferring an overseas pension should speak with a tax adviser before relying on the calculations or choosing a payment method, as the best option will depend on their personal tax position.
