Transferring UK pensions to Australia What you need to know: Recent changes to regulations will permit easier transfer of UK Pension Benefit to Australia. This is good news! However, the transfer process is still quite onerous with a number of requirements that must be met before transfer is permitted. There are also Taxation, Australian Superannuation and Centrelink issues that need to be considered before the decision to transfer is made. The requirements... To transfer any UK Pension Benefits to Australia, the following requirements must be met: Permanent departure from the UK with no intention of returning to work or retire Employment or self-employment in Australia Australian residency for tax purposes No part of the UK Benefit commenced paying a pension Payment directly from the UK scheme to an APRA approved Australian superannuation fund Superannuation Issues... Amounts transferred to an Australian superannuation fund from a UK pension fund are classified as undeducted contributions and preserved until a condition of release is met. For a customer to be able to transfer benefits to an Australian superannuation fund, they must satisfy the usual contribution rules such as gainful employment. As the payment is not considered to be a rollover, the customers’ eligible service period does not include membership in the UK fund or employment with the UK employer. Tax Implications... There are potentially two areas where a client may be subject to tax upon transfer of UK pension funds. If the transfer is not received by an Australian superannuation fund within six months of the customer becoming an Australian resident, tax is payable on any growth in the UK pension scheme at their marginal tax rate. If part of the payment amount represents an amount that was not fully vested in the member at the time of transfer, the non-vested amount will be subject to contributions tax by the Australian superannuation fund. Residency... To be considered a permanent resident of Australia for tax purposes, the ATO considers a number of factors including the way a person has arranged their domestic and economic affairs, their employment and their social and living arrangements. No single factor is necessarily decisive. What if the funds remain in the UK? A customer can generally access their UK pension benefits upon reaching retirement age. Depending on the rules of the scheme, benefits must be taken either as a pension, or a combination of a lump sum and pension. Under Australia’s double tax agreement with the UK, a UK pension paid to an Australian resident is only taxable in Australia and must be included in the customer’s assessable income. The pension payments may have a deductible amount if they include member contributions. However the pension is not entitled to the 15% rebate which applies to resident pensions. Depending on the nature of the UK fund, if the benefit is left in the UK it may be caught under Foreign Investment Fund legislation. In conclusion... In order to take advantage of tax concessions available in the first six months of residency, clients should determine as quickly as possible whether or not they wish to transfer their UK pension entitlement to Australia, as the transfer process can take up to four months to be completed. Customer’s who are liable to tax as a result of the transfer need to be aware that the liability cannot be paid out of the transferred amount; rather it will have to be paid out of other income. When deciding whether to transfer benefits, the potential value of any UK pension on retirement needs to be weighed against the value of undeducted contributions in the customers’ Australian superannuation fund. While the customer may avoid paying up-front tax if choosing to receive a pension from the UK, the pension will be fully taxable and contain little or no tax-free amount. In addition, Martyn also specialises in... Life Insurance Income Protection Insurance Business Expenses Insurance Total and Permanent Disability Insurance Trauma / Recovery Insurance Child Cover Insurance Minimisation Strategies Succession Planning Investments Managed Funds Self Managed Funds To find out more to enable you to make an informed decision, e-mail Martyn Forrester or check out our website www.synergyfinancialconcepts.com.au Martyn Forrester Authorised Representative Gold Financial Pty Ltd Perth Office Unit 4 / 2 Robert Street, Como, Western Australia 6152 PO Box 700, Como, Western Australia 6952 T (08) 9450 3468 F (08) 6210 1457 M 0409 314 987 E [email protected] W www.synergyfinancialconcepts.com.au