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Intending to retire in Australia?

Published 8th September 2014

If you’ve worked in the UK, whether you’re a UK or Australian citizen, and intend on retiring in Australia, it’s not too late to save your UK pension fund. It is possible to transfer most UK retirement monies to an Australian fund as long as it’s registered as a Qualifying Recognised Overseas Pension Scheme (QROPS). 

A Self Managed Super Fund (SMSF) can become a QROPS registered fund, and Oncore Wealth Solutions can assist in setting this up.

Australian retirement tax concessions are focused more on the retirement phase and less on the accumulation phase, designed to promote self-funded retirees. This is the reverse of the situation that applies in most overseas countries. Consequently, in most situations, a transfer prior to retirement has a significantly beneficial tax minimisation affect. Under current legislation within Australia, if you are 60 years of age and retired you can draw a tax free pension and pay no tax on income within your Superannuation fund. This is essentially tax free living.

What and how much can I transfer?
An Australian fund can only accept a transfer up to the fund-capped contribution limit in a single transaction. The limit is currently $540,000 for people under age 65 (three years in one lot). If you are aged 65 or over at the time of transfer, Australian super funds can only accept an amount of $180,000 currently if you are still working, and nil if you are not. This is important to be aware of as the window of opportunity does shut.

Tax on transfer
If you move from the UK and have been a resident of Australia for more than six months, there will be a portion of your rollover that may be subject to tax after this point. This is calculated as the value in GBP when you became a resident, less the amount at date of transfer in GBP. Based on the net gain, there will be tax applied, but you must take into account the exchange rate as it may work for or against you here.

What happens if I don’t transfer?
We need to consider the situation both before you reach retirement and also when a pension is being accessed from an overseas source. If you are in Australia and you do draw a foreign pension you must be aware that Australians are taxed on a worldwide income.

Remember too that pensions and lump sum benefits sourced from Australian monies, i.e. an Australian Super Fund for people over the age of 60 who are retired is, under current legislation, tax free and received tax free in the hands of the ‘pensioner’.

Why choose a Self Managed Super Fund?
Australia offers the Self Managed Super Fund option to enable fund holders to fully control their retirement investment strategy and plan by becoming the trustee of their own Super Fund. A Self Managed Super Fund gives access to investment options such as direct residential or commercial property, direct shares and cash, or fixed interest assets not available through a regular industry or retail superannuation provider.

To boost your balance before retiring, some people choose to borrow or acquire property, which is then paid off by a combination of employer super contributions and rental payments over time. Prior to pension phase, Super earnings and capital gains are taxed at a maximum of 15 per cent. In pension phase, you are looking at a zero per cent tax rate for earnings and capital gains. So if you are considering a long term investment in real property, this strategy could save you money.

As with most things, there are of course some risks inherent. Aside from the potential disadvantage of the exchange rate, there is also the risk you may lose any benefits attached to your UK pension fund, such as insurance. There are also rules still in place that give the UK rights to take back or tax the pension transferred for up to six years after the transfer has taken place. Whilst it is difficult to tell when the likelihood of this may be, the law does exist nonetheless.

This process takes time, as all good things do. If you see the value in the outcome, it is definitely worthwhile. We are willing to assist in getting the Self Managed Super Fund established in the right manner and your rollovers complete and ready for your investment strategy to take effect.

Self Managed Super Funds are not for everyone. The dollar balance and what your desired investment strategy is, along with the associated costs, will need to be weighed up prior to making the decision to set up this type of tax structure. 

Contact Stacy Barnes at Oncore Wealth Solutions on 1300 654 484 to discuss if this type of retirement vehicle will suit you, or for other QROPS rollover and retirement planning queries. Alternatively, visit the Oncore Wealth Solutions website for more information on services available.