A Member’s Account in a Workplace Savings Scheme

Reference

This determination is made under section 91AAW of the Tax Administration Act 1994.

Interpretation

In this determination, unless the context otherwise requires:

“AML/CFT Act 2009” means the Anti-Money Laundering and Countering Financing of Terrorism Act 2009.

“AML regulation” means anti-money laundering and countering financing of terrorism regulation under the AML/CFT Act 2009 (as modified by any applicable AML exemption pursuant to the AML/CFT Act 2009).

“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 reporting period” means the period from 1 April 2018-31 March 2019 and any subsequent 12-month period from 1 April to the following 31 March.

“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:

1. developed by the Organisation for Economic Co-operation and Development and the Group of Twenty countries; and
2. agreed by the Council for the Organisation for Economic Co-operation and Development on 15 July 2014; and
3. contained in Part IIB of the CRS publication.

“Employee” means an employee of an Employer.

“Employer” means an entity that is (or at the relevant time was) an employer (or an associated entity) participating in or otherwise contributing to the Scheme for the benefit of a Member who is (or at the relevant time was) an Employee of that Employer or an Employee of an associated entity.

“ESCT” has the same meaning as in s YA 1 of the ITA 2007.

"Financial Account" has the same meaning as in Section VIII(C)(1) of the CRS standard.

“FMC Act 2013” means the Financial Markets Conduct Act 2013.

“ITA 2007” means the Income Tax Act 2007.

“Member” means a natural person who holds an account in the Scheme.

“Member’s Account” means an account held by a Member in the Scheme.

“Overseas Secondment” means a period of secondment from the Employer to perform services for or at the direction of the Employer (or a third party) outside New Zealand. For secondments for any period from 1 July 2017 (inclusive), this definition means a period of secondment from the Employer to perform services for or at the direction of the Employer (or a third party) outside New Zealand for a continuous period of up to one year.

“PAYE” has the same meaning as in s YA 1 of the ITA 2007.

“Permitted withdrawal” means a withdrawal that is permitted to be made from a registered workplace savings scheme in accordance with s 130 of the FMC Act 2013.

“Register of managed investment schemes” is defined in section 6 of the FMC Act 2013 and means the register of managed investment schemes kept under Schedule 2 of that Act.

“Retirement or pension account” means an excluded account that fully satisfies the requirements of subparagraph C(17)(a) of Section VIII of the CRS standard.

“Scheme” means a scheme that is registered on the register of managed investment schemes as a workplace savings scheme under the FMC Act 2013.

“Temporary Absence Contribution” means a contribution (if applicable) made by a Member to a Member’s Account (in accordance with the Scheme’s trust deed) while on an absence from work agreed with their Employer.

“Work Visa” means a temporary visa granted under the Immigration Act 2009.

In this determination, any reference to a statute includes that statute as amended or replaced from time to time, and any reference to a section is to the corresponding section of any amended or re-enacted statute.

Discussion (which does not form part of the determination)

Each of the Schemes covered by this determination primarily conducts a business of investing, administering or managing financial assets or money on behalf of the Scheme’s Members. Therefore, in terms of the CRS standard, the Scheme is an investment entity financial institution.

As a workplace savings scheme (registered as such under the FMC Act 2013) each Scheme has the purposes of providing retirement, disability, and death benefits as well as benefits to Members on ceasing employment with an Employer (whether immediately on ceasing that employment or subsequently).

Scope of determination

A Member’s Account does not fully satisfy the requirements for a retirement or pension account in subparagraph C(17)(a) of Section VIII of the CRS standard, but has substantially similar characteristics as well as other substituting characteristics which provide an equivalent level of assurance that such an account presents a low risk of being used to evade tax.

This determination is issued by the Commissioner of Inland Revenue and applies to a Member’s Account in the Scheme where each of the following conditions is satisfied (for the Scheme or the Member’s Account as applicable):

• The Scheme continues to maintain the Member’s Account as part of a registered workplace savings scheme under the FMC Act 2013;
• The Scheme continues to be subject to AML regulation;
• The Member satisfies one of the following:
  • The Member is an Employee that is working in New Zealand for the Employer (or is working overseas on an Overseas Secondment); or
  • The Member is a former Employee that was working in New Zealand (and/or on an Overseas Secondment) at the time the Employer and/or the Member made contributions to the Member’s Account; or
  • The Member is receiving a pension or other benefit from the Scheme by reason of being the widow, the widower or a dependant or nominee of a deceased former Employee that was working in New Zealand (and/or on an Overseas Secondment) at the time the Employer and/or the deceased former Employee made contributions to the Member’s Account;
• The Member is not present in New Zealand on a Work Visa;
• All Employer contributions are or have been subject to tax at source where New Zealand law requires or has required (e.g. ESCT);
• All the Member’s contributions (including past contributions), other than Temporary Absence contributions if applicable, are (or have been) made while an Employee, deducted from payroll (salary, wages, or other remuneration) as a portion of the Member’s salary, wages, or other remuneration, and are from remuneration that has been subject to tax (i.e. tax paid contributions). This includes contributions from income that is subject to PAYE (or equivalent source deduction payments made where the Employee is or was working overseas on an Overseas Secondment);
• Any Temporary Absence contributions did not exceed the frequency and amount of the Member’s contributions immediately prior to the start of the agreed absence from work;
• Annual contributions (including both Employer and Employee contributions) to the Member’s Account continue to be equal to or less than USD 50,000 per annum (including any applicable aggregation rules set out in the CRS). If the Scheme is a defined benefits scheme (or includes a defined benefits section) it is required to adopt a reasonable method when determining the level of Employer contributions made to a Member’s Account;
• Investment income from the Member’s Account is subject to income tax at the Scheme level and occurs at source (i.e. not subject to the Member filing a tax return);
• All such taxation is reported to Inland Revenue (if applicable);
• The Scheme continues to allow Members only to make Permitted Withdrawals; and
• Any transfers into the Member’s Account on or after 1 July 2017 from sources other than the Employer or Employee contributions referred to above are from Financial Accounts that meet the requirements of subparagraph (C)(17)(a) or (b) of Section VIII of the CRS standard or from one or more retirement or pension funds that meet the requirements of any of subparagraphs B(5) through (7) of Section VIII of the CRS standard. Any transfers into the Member’s Account made prior to 1 July 2017 from sources other than the Employer or Employee contributions referred to above were from entities or Financial Accounts that would, based on a reasonable assessment by the Scheme (including, if applicable, the manager and or trustee and Scheme administrator), in conjunction with the Employer as necessary and based on information in their possession, have been exempt under the above provisions, as if the CRS standard had applied prior to 1 July 2017. A Member’s Account that otherwise satisfies the USD 50,000 contributions threshold outlined above will also not fail to satisfy this requirement solely because the Account may receive assets or funds transferred from such excluded accounts or excluded funds.

Determining that a Member’s Account in the Scheme is an excluded account, and specifying this under New Zealand law, does not frustrate the purposes of the CRS standard.

Determination

A Member’s Account in the Scheme, as outlined in the scope of this determination, is an excluded account for the purposes of the CRS applied standard and requirements under Part 11B of the Tax Administration Act 1994. If any of the above conditions are not satisfied for a particular Member’s Account this determination will not apply to that account.

Application date

This determination applies for the CRS reporting period beginning 1 April 2018, and subsequent CRS reporting periods under the CRS applied standard.

Dated at Wellington this 30th day of July 2019.

Tony Morris

Customer Segment Lead, Significant Enterprises