Tax help for superannuation

[zuly]

Hey guys I’m writing from aussie but need some help for my father who has just been fired from his job. He is turning 65 later this year and his retirement fund is being discharged to him from his previous employer. It’s not much, roughly $275 k.

We are wanting to put it in a term deposit short term because he needs to draw an small income to tie him over, however I’m unsure of the tax implications.

His super (its not KiwiSaver) is literally being put in his account in a month or so does this count as income and would this mean he is taxed at the highest rate if we were to put it into a TD. Is there any alternatives or ways to minimise tax?

I’m low key panicking because he’s not financially literate, i have average financially literacy and worried I’m overlooking tax implications and I just want to set him up as best as I can for the years ahead.

 

[manuele]

@zuly Usually super funds in nz are taxed as they are contributed to look up ESCT. So shouldn’t be subject to tax on withdrawal, if you’re worried about it

Any interest payed out by a term deposit will be taxed at this income paye tax level based on his entire year earning total.

If he has no other income at all for the entire year, then there is no difference between Pie term and normal term deposit as he’d be taxed at 10.5 percent with a return of 7000~ for that amount

Edit: you have to notify the bank of his PIR and RWT rates I’m pretty sure or they will assumed 28 and 33 respectively.

 

[charlyrich]

@manuele If you don't notify, they're getting harsher and using the no declaration rate more now - 45%

Legally they are supposed to do that.

 

[zuly]

@manuele Thankyou for that info! Appreciate it

 

[surrenderingtogod]

@zuly If you make sure his bank is taxing his term deposits at 17.5%, he should be fine and probably will get a small tax refund next year. Other than that, there are no tax implications and it will not affect his super. If he gets another even part-time job, his super will be taxed at a higher rate, but that will even out over the year. It’s done like that so he won’t get a tax bill any year end.

 

[zuly]

@surrenderingtogod Thankyou for your help!

 

[akkol]

@zuly His PIR for this new tax year will be based on his taxable income in the last 2 years https://www.ird.govt.nz/roles/portfolio-investment-entities/using-prescribed-investor-rates so you can't just pick 17.5% at random.

 

[charlyrich]

@zuly Assuming a NZ policy, and always a NZ policy.

How long have they been in it?

Some of the long term ones may have other issues, but generally any NZ super scheme is taxed going in, not taxed going out.

So the lump sum should be tax free.

Then only taxable on the investment returned when you invest it elsewhere.

 

[zuly]

@charlyrich Thanks for your reply, he’s been with them for about 25 years I think.