Determination of Residence of Cook Island National Superannuation Fund

Sections OE 2(1) and OE (1B) of the Income Tax Act 1994 and the Income Tax Act 2004

The Income Tax Act 1994 and Income Tax Act 2004 have been amended to treat the Cook Island National Superannuation Fund as a non-resident for New Zealand tax purposes so that the Fund will be liable for New Zealand tax only on New Zealand-sourced income. 

Background

The Fund is a compulsory national superannuation fund established by Cook Islands legislation.  It was established to provide all employees and self-employed people residing in the Cook Islands with a pension in retirement.  Contributions to the Fund are compulsory for employers and employees unless contributions are made to a New Zealand superannuation fund.  The Fund is governed by a trust deed and the Public Trust of New Zealand has been appointed trustee of the Fund. 

The current governance structure of the Fund with the Public Trust being trustee potentially gave rise to unintended consequences under New Zealand's tax legislation.  As a result, the Fund could have been deemed a New Zealand-resident company and therefore subject to New Zealand tax on its worldwide income.  Consequently, the Fund sought a legislative solution to deal with this unintended tax effect.

Key features

Sections OE 2(1) of the Income Tax Act 1994 and the Income Tax Act 2004 provide the requirements for a resident company.  New section OE (1B) provides an exception when a company is acting as a trustee of the Fund.  A company acting in this capacity is treated as being non-resident in New Zealand for Income Tax Act purposes.

Application date

The amendment applies retrospectively from 1 July 2001, the date on which the Fund started.