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Thread: Is KiwiSaver worth it for an American citizen, NZ resident?

  1. #1
    Join Date
    Sep 2019
    New Zealand

    Default Is KiwiSaver worth it for an American citizen, NZ resident?

    I'm an American citizen and have recently received NZ residency. I'm wondering if it's worth opening a KiwiSaver account, or if it'll become too much of a burden for filing taxes in the US. At this point I have a low-middle class income and wouldn't put away heaps of money in the account. I have simple finances so am able to file my US taxes and FBAR without paying an accountant. I also have a Roth IRA that I can use to save money for retirement. At this point, I don't know where I will retire, but I expect it's more likely to be the US than NZ.

    Any advice is appreciated.


  2. #2
    Join Date
    Apr 2017
    Christchurch, New Zealand


    You should consult an accountant familiar with US & NZ taxes before you commit to KiwiSaver. I don't have direct experience, as I do not work, but I understand from other US citizens that KiwiSaver is a tax nightmare for us. It is related to pre/post tax contributions and what the US considers foreign investments. Most people in my Americans in NZ group have opted out.

    Obviously do your own research to see what works for you. But definitely do research to avoid a headache.

  3. #3
    Join Date
    Jan 2007
    Chch, NZ


    The problem is rooted in taxation. As you may be aware FACTA applies in NZ so any bank account / joint bank account / or investment account like Kiwi Saver will be reported to the IRS. But this is not the key problem but as the previous post said, it creates a $ stream for tax accounts to charge year after year which erodes the performance of Kiwi Saver. Not that tax filing can't be done by yourself but the main issue is you would be tax disadvantaged all the way to retirement and after.

    As a NZ tax resident, all foreign property you own abroad should be declared if it's over $50K in NZD (this means if you have a Wells Fargo bank account with $20K and an IRA with $40K) there for ALL those accounts will need to be reported as the total cumulative amount exceeds the $50K threshold where FIF applies. FIF = Foreign Investment Fund which is NZ's view of taxating 'paper gains' since NZ has no formal capital gains tax law. Long ago, NZ never use to care about individuals owning foreign assets but times have changed quickly and loop holes were covered up. So while you may have a tax free IRA, the annual gains in those accounts will still be taxed, despite without making any withdrawal by selling the shares.

    It gets worse, on the NZ side the IRS does not view Kiwi Saver as a tax free savings scheme so when you access those funds at age 65, you will have to declare capital gains to the IRS despite in NZ, the normal NZ resident would have NO tax liability upon withdrawal.

    This is not limited to just Kiwi Saver but as a US citizen, ANY investment account you have in NZ, the IRS will want to know (keep in mind, those who have little or no assets do not apply - but that is very unlikely as any person moving to NZ would have some assets, meaning it's not hard to exceed the $100K threshold cumulative on all accounts).

    NZ has a tax treaty with the US so you won't be "double taxed". But unlike the US, the limits in NZ for what you can claim as a 'foreign tax credit' are much less than what the IRS allows. If I recall correctly, the IRS has an $80K income exemption on US expats living abroad. But this can easily be exceeded say when you turn 65 and go on a retirement purchase (new vacation home, motorhome, boat? etc.) and so when you try to claim any portions more to NZ's IRD, you may not be able to claim the full 100% extra you paid to the IRS.

    You really don't need to consult a tax accountant and all the info is available online. You don't need to know the exact figures but the key takeaways are:

    1) The tax approach on investment accounts are at opposites between NZ & the US. The NZ approach is to tax gains every year and at the end - you walk away with no tax liability. In the US, the emphasis is to allow for maximum tax free compound returns and at the end at retirement, tax is paid on what gain is made.

    2) Tax accountants in NZ are very greedy and the fees involved may not be worth the hassle to deal with having a Kiwi Saver fund.

    3) Keeping things in joint account does not get away from FACTA (like wise applies for other countries that have imposed CRS 'Common Reporting Standard').

    Of course you also have to know where you will retire? Will you one day move back to the US? Since FACTA was brought out, many that left the US made the commitment to never reside back again ; so they went through the process of renouncing US citizenship which is the only way to get away from FACTA.

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