KiwiSaver scheme (non-reporting financial institution)
CRS 2017/002 (1 Jul 2017) determines that a KiwiSaver scheme is a non-reporting financial institution for the purposes of the Common Reporting Standard requirements.
Determination CRS 2017/002 – A KiwiSaver scheme is a non-reporting financial institution for the purposes of the CRS applied standard and requirements under Part 11B of the Tax Administration Act 1994
This determination is made under section 91AAW of the Tax Administration Act 1994. This power has been delegated by the Commissioner of Inland Revenue to the position of Group Manager, Investigations and Advice, under section 7 of the TAA.
In this determination, unless the context otherwise requires:
“AML/CFT” means anti-money laundering and countering the financing of terrorism.
“Broad Participation Retirement Fund” means a fund that is a ‘non-reporting financial institution’ under subparagraph B(1)(b) of Section VIII of the CRS standard, and that satisfies the requirements of subparagraph B(5) of Section VIII of the CRS standard.
“Crown contribution” means the contribution made by the Crown under section 226 of the KiwiSaver Act 2006, and the amount of tax credit under section MK 1 of the Income Tax Act 2007, that is treated as a Crown contribution for a member under section MK 5 of that Act.
“CRS applied standard” means the CRS standard as modified by section 185O for the determination of requirements under the Tax Administration Act 1994.
“CRS publication” means the Standard for Automatic Exchange of Financial Account Information in Tax Matters, published by the Organisation for Economic Co-operation and Development.
“CRS standard” means the Common Standard on Reporting and Due Diligence for Financial Account Information, as amended from time to time, which is a standard—
- developed by the Organisation for Economic Co-operation and Development and the Group of Twenty countries; and
- agreed by the Council for the Organisation for Economic Co-operation and Development on 15 July 2014; and
- contained in Part IIB of the CRS publication.
“FMC Act” means the Financial Markets Conduct Act 2013.
“ITA” means the Income Tax Act 2007.
“KiwiSaver member” in relation to a KiwiSaver scheme, means a natural person who has been admitted to membership of the scheme and who is, or may become, entitled to benefits under the scheme.
“KiwiSaver member’s account” in relation to a member of a KiwiSaver scheme, includes any account held by that member in the KiwiSaver scheme.
“KiwiSaver scheme” is defined in section 6 of the FMC Act, and means a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme under the FMC Act.
“NRFI” means a non-reporting financial institution.
“Permitted withdrawal” means a withdrawal that is permitted under the KiwiSaver scheme rules in Schedule 1 of the KiwiSaver Act 2006.
“PIE” means an entity that is defined in section HM 2 of the ITA, which complies with the Portfolio Investment Entity (PIE) rules, as defined in section YA 1 of that Act.
“Register of managed investment schemes” is defined in section 6 of the FMC Act, and means the register of managed investment schemes kept under Schedule 2 of that Act.
“TAA” means the Tax Administration Act 1994.
Discussion (which does not form part of the determination)
A KiwiSaver scheme is a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme under the FMC Act. The register is maintained by the Financial Markets Authority. In order to be included on the register, a KiwiSaver scheme must fully meet the registration requirements as set out in sections 126 to 128, and other relevant provisions, of the FMC Act.
Three of the additional registration requirements in section 128 are that a KiwiSaver scheme:
- Is a trust, established and governed by a trust deed, under NZ law;
- Has a purpose of providing retirement benefits directly to individuals; and
- Has a manager who has at least one director who is a New Zealand tax resident.
The policy intent behind KiwiSaver schemes is to encourage long-term savings habits and asset accumulation by individuals principally through the workplace. Only natural persons can become members of a KiwiSaver scheme. A member must meet the New Zealand requirements which include:
- Being a NZ citizen, or being entitled to live in New Zealand indefinitely under NZ law; and
- Living, or normally living, in New Zealand.
KiwiSaver members who are in paid employment have minimum contributions deducted from their earnings and paid to Inland Revenue through the PAYE system along with their employer’s contributions. Inland Revenue then distributes the funds to each KiwiSaver member’s allocated KiwiSaver scheme which allocates the funds to that member’s account. If a person changes employment or leaves the workforce their KiwiSaver member’s account goes with them.
KiwiSaver members who are not in paid employment can choose to make contributions directly to their KiwiSaver scheme or to Inland Revenue. All KiwiSaver members can also make voluntary contributions into their own, or into another, KiwiSaver member’s account.
All KiwiSaver contributions are locked in until the later of:
- When a member is eligible for New Zealand Superannuation; or
- After five years of membership;
unless a member makes another type of permitted withdrawal in accordance with the requirements of the KiwiSaver Act 2006.
A KiwiSaver scheme:
- Is principally a fund to provide retirement benefits to its members;
- Is subject to regulation under the KiwiSaver Act 2006, the FMC Act, the ITA and the TAA;
- Is subject to AML/CFT procedures under the Anti-Money Laundering and Countering Financing of Terrorism Act 2009;
- Has information reporting and disclosure obligations to Inland Revenue;
- Attracts a Crown contribution by way of an annual limited member tax credit for individual members contributing a minimum amount each year;
- Only allows members to make permitted withdrawals; and
- Attracts a lower tax rate for investment income tax, if the scheme is a PIE.
A KiwiSaver scheme has substantially similar characteristics to a Broad Participation Retirement Fund in subparagraphs B(1)(b) and B(5) of Section VIII of the CRS standard, and has other substituting characteristics which indicate that such a scheme presents a low risk of being used to evade tax.
Determining that a KiwiSaver scheme is a NRFI, and specifying this under NZ law, does not frustrate the purposes of the CRS standard.
Scope of determination
A KiwiSaver scheme does not fully satisfy the requirements for, but has substantially similar characteristics to a Broad Participation Retirement Fund outlined in subparagraphs B(1)(b) and defined in B(5) of Section VIII of the CRS standard.
This determination is issued by the Commissioner and applies to a KiwiSaver scheme where:
- The KiwiSaver scheme does not have a single beneficiary with a right to more than 5% of the fund’s assets; and
- The KiwiSaver scheme is a scheme that is registered on the register of managed investment schemes as a KiwiSaver scheme, under the FMC Act; and
- The KiwiSaver scheme continues to maintain its registration on the register of managed investment schemes as a KiwiSaver scheme, and its manager complies with the relevant on-going registration requirements under the FMC Act.
A KiwiSaver scheme, as outlined in the scope of this determination, is a non-reporting financial institution for the purposes of the CRS applied standard and requirements under Part 11B of the Tax Administration Act 1994.
This determination applies for the reporting period beginning 1 July 2017, and subsequent reporting periods under the CRS applied standard.
Dated at Wellington on the 23rd day of May 2017.
Group Manager, Investigations and Advice