- Tax Advisory. Tax Compliance. Legal. Expats.
UK Pension to Australia Tax Considerations
US Expats and the tax implications of withdrawing your US Retirement Plans (401k, IRA) in Australia
17/07/2023
Section 99B and Foreign Trusts
28/10/2023
UK Pension to Australia Tax Considerations
A common question we receive from our clients is are they able to transfer their UK Pension to an Australian Superannuation Fund and what are the associated tax implications.
We have outlined some of the key points below to consider from an Australian and UK tax perspective. This is a complex area and therefore we recommend further personalised advice be obtained.
It is important that both the Australian and UK Tax consequences are considered.
We note that from a UK perspective, the option to withdraw or transfer funds from a UK Pension typically becomes available from age 55. See more here.
Lump Sum Withdrawal
Within 6 months of first commencing Australian tax residency
Withdrawing a lump sum from a UK pension within 6 months of becoming an Australian tax resident usually means that the withdrawal is not subject to Australian tax.
After 6 months of commencing Australian tax residency
Where an Australian resident taxpayer makes a withdrawal after 6 months of commencing Australian tax residency, generally a taxpayer will be liable to Australian taxation on the accrued growth of the fund starting from the date they commenced Australian tax residency (referred to as the Applicable Fund Earnings).
We note that from a UK Tax Perspective, generally 75% of the withdrawal would normally be taxable in the UK. Nevertheless, in accordance with the double tax agreement between Australia and the United Kingdom, it is possible to submit a request to the HMRC’s non-statutory clearance division and acquire a tax code of zero from HMRC, enabling one to access the advantages of the tax treaty. Consequently, the withdrawal should only be subject to Australian tax. This can be a lengthy and complex process, however, it would normally result in a preferred tax outcome.
Transfer to an Australian Superannuation Fund
It is also possible to transfer a UK Pension to Australian superfund that is a Registered Overseas Pension Fund from age 55.
There are two options to do the transfer:
- To an Australian SMSF; or
- A Public Offer Fund.
Still, it’s essential to examine Australia’s non-concessional cap limits and the overall superannuation cap, ensuring that you don’t exceed these limits when transferring funds to an Australian superannuation account. Australia’s yearly non-concessional cap is currently $110,000, however under the 3 year bring forward rule, it may be possible to contribute $330,000 in one year.
Normally, the benefit of transferring a UK Pension to an Australian super fund is that the growth of the pension since commencing Australian tax residency is subject to Australian tax at 15% in the superfund (as opposed to your personal tax rate).
Another advantage of having money in an Australian superannuation fund is that the returns on investments within the super fund are subject to concessional tax rates, and you can withdraw your funds without any tax obligations once you’ve reached your preservation age.
Please do not hesitate to get in touch if you require further information.
Murphy Tax
