Kiwis returning home to retire will soon be eligible to bring their Australian superannuation with them.

Australia has operated a compulsory super scheme for many years which caught Kiwis working over there.

Currently, returning Kiwis who have contributed to an Australian super fund are unable to unlock their savings.

The Australian Tax Office estimates it holds more than NZ$20 billion in "lost accounts", much of which it believes could belong to Kiwis who have returned home.

The news has resulted from the Australian Government introducing legislation a couple of weeks ago and follows on from the 2009 trans-Tasman retirement savings portability agreement signed by the New Zealand and Australian governments.

The agreement aims to remove barriers to cross-border labour flows and to reduce the complexity for taxpayers when they have permanently shifted to either country.

The long-awaited legislation means taxpayers with superannuation savings in New Zealand and Australia will be able to consolidate both amounts into one scheme in their country of residence.

The new legislation allows the transfer of retirement savings between the two countries free of entry and exit taxes.

Typically this will arise where a person withdraws funds from an Australian super fund, returns permanently to New Zealand and contributes those savings into a KiwiSaver fund. The portability proposal does come with a catch.

The funds are only tax exempt if they are contributed into a KiwiSaver fund from a complying Australian fund. Generally the super rules of the host country will determine access to the funds. Essentially access to funds transferred from Australia will be denied until the person reaches the age of 60, provided the individual satisfies the Australian definition of retirement.

Prospective candidates are advised to seek professional advice prior to entering the scheme, particularly if the amounts involved are substantial. Those who have lost track of their Australian superannuation savings can visit the "Super Seeker" tracking service provided by the Australian Tax Office.

The scheme is expected to come into effect on July 1 next year.

Greg Harris is a specialist tax partner in the Hamilton office of Deloitte.

- © Fairfax NZ News