Last July, Inland Revenue released a paper setting out options for the tax treatment of foreign pensions transferred to New Zealand.

The consultation period closed in September.

The proposal would see a percentage of transferred funds being treated as taxable income on a sliding scale depending on how long the owner of the funds had lived in New Zealand at the time of the transfer.

However, it is understood that the tax department is planning to adjust its proposal to account for “transitional residents”.

New residents to New Zealand are given a four-year tax exemption on their foreign-sourced investment income.

This means that under the current proposal, those inside this four-year period at the time of transfer wouldn’t be taxed at all, while those just outside it would be taxed on 15% of transferred funds.

Industry sources suggest this will be changed so that rather than being counted from the day someone arrives in New Zealand, the clock will start at the end of the four-year transitional residency period.

Chris Heffernan, an accountant at Leech & Partners, said if the rumoured changes did go ahead it would be fairer than having people go straight into the second band of taxable income after the transitional period.

“To ignore the fact they have not been residents and then treat them as residents would be unfair.”

An Inland Revenue spokesperson said no final decision has been made as yet, so no further material has been available for public release.

“Officials have analysed the submissions received and recommendations based on public feedback are being proposed to the Government for consideration.

“It is expected that draft proposals will be included in legislation for introduction by the middle of this year.”