Regarding NZ Kiwisaver account

[vsun]

Hi, 

My spouse is a NZ citizen and moved to USA in Feb 2024 on a GC. There are no plans to move back to NZ. Given that, can she move her kiwisaver account (401k equivalent) to USA and add it to her current 401K balance in the US? Are there are any tax implications for such a move? If so, what options does my spouse have to reduce taxes?

[NCperson]

A rollover to a IRA or 401 is quite unlikely since a kiwisaver account is not a qualified account that could be transferred.  

If you liquidate the kiwisaver account, that income is reportable on a US tax return since your spouse is  a Green Card holder and all worldwide income must be reporte on a US tax return.  There would be a credit for foreign taxes paid if taxes were due to NZ.   I am assuming no tax was ever paid on the money contributed into the kiwisaver account. 

[pk]

@vsun , from what I gather  ( from NZ kiwisaver , Inland revenue etc. ),  both the employee and the employer contributions are taxed contemporaneously/yearly. Thus  since the distribution is ONLY possible after attaining superannuation age  ( currently 65 ? ), if you are able to get lumpsum and document that the contributions ( employer/employee ) are already taxed , your exposure may be only the gain.  I need to study the US-NZ tax treaty to see if there is any mention of this.

Am generally agreeing with my colleague @NCperson .

[vsun]

Hi @NCperson  and @pk,

Thanks for the information.

What I understand from my spouse is that the employer contribution is taxed (ranging from 10.5 %-39%), the employee contribution goes in after income tax is paid on the salary (so after-tax income) and investment earnings are taxed at a flat rate of 28%. 

In this case, since all taxes have been paid already, if I do a lumpsum withdrawal (given spouse has been away from NZ for more than a year), would it suffice to declare this income in US and mention all taxes have been already paid? Or I have to still declare it as credit for foreign taxes paid? 

Is there a option to bring in the money without paying any further taxes?

Also, did you get more info from the NZ/USA tax treaty?

Thanks in advance!

[pk]

@vsun , 

(a) Yes I see that a NZ employee/participant whom has move to another country ( not Australia) and after 1  year minimum of being abroad can withdraw the savings in the program  My ref -- Getting my KiwiSaver savings when I move overseas.  Further ref . is -- KiwiSaver Act 2006 No 40 (as at 01 July 2025), Public Act – New Zealand Legislation.

(b)  Based on the above  , if you use the lump-sum distribution, your amount should consist of  already taxed amounts ( employer contribution  plus that of the employee) PLUS growth over the years  ( and un taxed by NZ).   My impression is that this "growth" amount is not taxed when distributed ( post superannuation for sure ). I am unsure of whether this growth is taxed  if distribution occurs because the employee/ citizen is no longer a NZ resident.

(c) As I said earlier,  if you do proceed with the early distribution, then for the US return you have to use a dummy 1099-R mechanism showing the total distribution received , and the growth portion as taxable.  This would mean US will tax you on that grwoth ONLY.  Please keep good records to show how you computed the "taxable " portion of the distribution.

(d) The tax treaty between US and NZ, has no direct reference  to Kiwisaver  under pension/annuity . However, there is small ref. about all incomes not directly ref'd in the treaty ( but under the general heading of income) can be taxed by the country of residence. Thus US will tax this income.

(e) Since the taxation of the contributions took place prior to your wife moving to US ( and coming under US tax regs. ),  those  taxes  are NOT eligible for Foreign Tax Credit  ( double taxation  avoidance ).  However if NZ taxes the growth in the Kiwisaver account then that tax will be eligible for FTC .

If this has answered your query , please mark this as accepted ( and thereby close this thread) or please tell me what more I can do in that regard .

pk

[vsun]

Hi @pk ,

Thank you for this information. I have asked my spouse to check on whether NZ govt will be taxing  on the lumpsum payout. I do know that she has been paying some taxes every year on this account. I will revert with more information  within a couple of weeks.

[vsun]

Hi @pk ,

The attached screenshot shows that the earnings every year are taxed already. Given that, would I still need to pay taxes to US? what would be the best approach to show that taxes have already been paid?

[pk]

@vsun based on what I have read about the Kiwisaver, your own post etc. it seems to be intended and behaves like a pension scheme. Therefore I would use a  dummy 1099-R -- only two items are of  import ---- Distribution amount ( total you took out of the account), Taxable portion  ( this should  be the growth for the year amount and probably the same as the amount being taxed by NZ for the tax year ). You may also have to use code 7 ( normal distribution) and   the code for "Total distribution" if you are taking all out and closing the account.

I don't know  if claiming foreign tax credit for that growth that is being  taxed by both NZ and US is worth it --- depends on the total foreign source income vs.  your world income  ( I am assuming your are filing MFJ  and that you are employed).

Does this make sense ?

Is there more I can do for you ?