On 26 Nov 2022, at 3:31 pm, 'Michael Skully' via BAPA <bapa...@googlegroups.com> wrote:
There is a useful review article by financial writer, John Wasiliev in the Australian Financial Review, 26-27 November 2022 on page 29.
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It is the second part of an article titled
I moved to
Australia three years
ago from the UK to
see if I liked the
thought of living
here. I’ve decided to
stay and am looking into what is involved in transferring my retirement savings here. I like the idea of a self-managed fund, but will it be easier to transfer this to a public fund or an SMSF? – Grant
A: It may be possible to achieve a transfer of your UK retirement savings to an Australian superannuation fund without any adverse UK transfer charge applying if the Australian fund is recognised by Her Majesty’s Revenue & Customs (HMRC) – the UK tax authority – as a Qualifying Recognised Overseas Pension Scheme (QROPS).
Under current UK pension rules, an overseas fund will only be eligible for QROPS status if its governing rules preclude UK-sourced pension money being payable to the member before they are 55, says William Fettes, a senior associate with DBA Lawyers in Melbourne.
The usual payment rules that apply to Australian super funds do not apply to a QROPS. These may allow a member to access benefits before age 55 for financial hardship, compassionate grounds and temporary incapacity, as well as the COVID-19 $10,000 special payments.
Australian funds must therefore operate with special age-based membership restrictions that apply to QROPS status which prevent accessing super before 55 unless the member has been permanently incapacitated due to ill-health before that age.
One method of achieving this, says Fettes, is to establish an SMSF with a special trust deed containing appropriate restrictions or otherwise by varying the deed for an existing SMSF.
In this way, the SMSF can obtain QROPS status and UK pension scheme money can be transferred free of UK tax and such UK criteria as a lifetime allowance cap (currently £1,073,100 – $1,911,138). You must be an Australian tax resident at the time of the transfer and for five straight UK tax years after.
Although there were previously several Australian retail or public-offer funds offering QROPS services, there are not many suppliers in this market.
It means you need to see whether you can find a non-SMSF supplier, as it appears many are using SMSFs with appropriately drafted QROPS-compliant documents.
You will also need to consider the application of Australian tax law provisions and applicable contributions caps.
Generally, a transfer from a qualifying UK pension scheme is recognised as a transfer from a ‘‘foreign superannuation fund’’ (FSF) for the purposes of Australian tax law. This means the transfer will be subject to Australian income tax on the part of the lump sum that is described as ‘‘applicable fund earnings’’ (AFE).
Typically, AFE represents the growth in the fund from the date you became an Australian tax resident. This amount is then subject to tax in Australia unless the transfer occurred within six months of residency or cessation of foreign employment, which would not be the case for you given you have been here for three years.
While the starting point for AFE is your marginal tax rate, if you complete a written election under section 30580 of the Income Tax Assessment Act 1997, it can potentially be taxed in an Australian super fund at the usual 15 per cent concessional tax rate.
Fettes recommends you seek advice from an expert in this area, as it is a complex one.
To make an effective election, it is critical no amount is left in the foreign fund after the transfer is made and the relevant paperwork is completed before lodging your personal tax return for the financial year of the transfer.
The non-AFE component of the lump sum being rolled over to the Australian fund will generally count as a non-concessional or after-tax contribution subject to your contribution cap.SI
To view this discussion on the web visit https://groups.google.com/d/msgid/bapanews/B71176FE-C079-4F88-AAE4-9FBA17D39019%40me.com.
To view this discussion on the web visit https://groups.google.com/d/msgid/bapanews/B71176FE-C079-4F88-AAE4-9FBA17D39019%40me.com.
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