Individuals over the age of 55 are eligible to consider a transfer of their UK pension benefits to Australia.

The main benefit is that any Lump Sum Payment or Pension Income generally paid from an Australian Superannuation Fund would be received free of tax once a condition of release has been met i.e. no tax to pay in Australia. Once a condition of release has been met your superannuation income is exempt income in Australia.

We are able to advise on UK expats regarding the taxation of UK lump sums and regular pension incomes in both the UK and Australia. We at GM Tax can also provide you with a comprehensive guide to your UK & Australian tax position when considering accessing or transferring your UK pension benefits to Australia.

Australia has contribution caps in place that limit the amount that can be transferred to Australia at any one time, these are as follows;

$120,000 pa plus growth since date of tax residency; Or
$360,000 pa plus growth with no further contributions for the next 2 financial years.

Unless it is your intention to intentionally exceed the caps. Professional advice is recommending is you are considering to transfer your pension benefits in excess of the contribution caps.

Individuals under the age of 67 and individuals who turn 67 in the financial year can make contributions without restriction however, individuals between the age of 67 and 75 years of age in the financial year have to satisfy the work test (40 hours over a consecutive 30-day period) to enable you to make contributions into Superannuation.

Bring Forward Arrangement

Your non-concessional contributions cap can be changed if you are eligible for the bring-forward arrangement.

This arrangement allows you to bring forward the equivalent of 1 or 2 years of your annual cap from future years. This means you can make contributions up to 2 or 3 times the annual cap amount in the first year of the bring-forward period. Any amount of the bring-forward cap that’s unused in the first year can be used in the remaining 1 or 2 years.

Eligibility for the bring-forward arrangement depends on your age and value of your total superannuation

Age

Once you are over the age of 75 you are not eligible to use the bring forward arrangement and so you would be restricted to transferring $120,000 pa to Australia.

Those under the age of 75 are able to use the bring forward arrangement however, you would need to check that you meet other age eligibility and other restrictions.

When considering a transfer of your pension benefits consideration needs to be given to any increases in your funds values since your date of tax residency. You will be liable to pay tax at your marginal rates of tax on the increase in value since the date of tax residency however, you can elect for the superannuation fund to pay the tax which is restricted to 15%.

Changes with regard to rollover and accessing benefits from a QROPS

Please note, after the transfer of UK sourced pension money to an Australian QROPS, it is then within the Australian superannuation system and will be covered by the Australian rules as described above. However, upon withdrawal or rollover to another superannuation fund, UK tax charges may still apply to the money.

There are two different tests for this. Which one should be used depends on when the transfer of the UK pension money to the QROPS took place.

If it was before 6 April 2017 then UK tax rules will still apply if the member:-

at the time of the rollover or withdrawal is tax resident in the UK or had been earlier in that UK tax year or in any of the 5 preceding UK tax years

If it was on or after 6 April 2017 then UK tax rules will still apply if the member:-

at the time of the rollover or withdrawal is tax resident in the UK or had been earlier in that UK tax year or in any of the 10 preceding UK tax years, or
a period of 5 years has not passed since the transfer of UK pension money to the QROPS took place.

If UK tax rules do not apply under the above tests, then a rollover of UK sourced pension money to a non-QROPS or a withdrawal by the member can be done without incurring UK tax. Please note that the investment restrictions continue to apply even if UK tax rules do not apply, and there are also special rules for the reporting obligations.

Therefore, if you were to consider transferring your UK pension benefits to Australia, as the transfer will be taking place after 6 April 2017 any withdrawals made from the Australian QROPS within 5 years of transferring the UK pension money to the Australian QROPS will be subject to UK tax charges.

The UK tax result is that:

• 25% of the amount built up in your pension pot can be taken as a tax free lump sum, the remainder of the lump sum will be subject to UK income tax at your marginal rate as stated above.

• Any pension income excluding Lump Sum Payments would be tax free in the UK as Australia has sole taxing rights of pension income under Article 17 of the Australia – UK Double Tax Convention.

GM Tax has a policy of providing a fixed fee quote to those that are interested in engaging our services

We at GM Tax can provide you with a comprehensive guide to your UK & Australian tax position when considering accessing or transferring your UK pension benefits to Australia, please call one of our offices or send an online enquiry via our website.

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