Foreign Pension Transfer FAQ's

There is usually no problem in a pension transfer being accepted by a complying Australian superannuation fund, regardless of source - although super funds will often respond that, "they do not accept foreign transfers". Most issues revolve around whether it is appropriate to transfer the funds bearing in mind home country factors; such as early release penalties, any withholding tax, the lump sum valuation and size of the fund; and issues such as to what extent the funds might be taxable in Australia or in the country of origin. Tax advice should almost always precede any decision to transfer these funds and be sought prior to an individual again becoming an Australian tax resident. The relative complexity attaching to these withdrawals and transfers means that it may not be economic to consider the transfer of small pension balances.

There is no limitation on what sort of funds you can transfer your pension fund into, including a Self Managed Superannuation Fund (SMSF) - subject to it being a QROPS fund if it is a UK transfer. It is recommended that you obtain financial advice in terms of what sort of fund and investment profile suits your personal requirements.

Foreign transfers into Australian superannuation generally take the form of non-concessional contributions, although some part of any transfer (fund earnings post residency) may be considered concessional contributions. Currently, in 2023, it is only been possible to make a maximum non-concessional contribution (NCC) of $110,000 per annum, with a maximum bring forward of two years of contributions, resulting in a maximum lump sum contribution of $330,000 with some age limits. These limits will increase to $120,000/$360,000 respectively from 1 July 2024. Large pension fund balances may consequently require transfers over a number of years and there are specific complexities involved, requiring experienced advice.

There may also be additional scope to make concessional contributions if an individual's super balance is less than $500,000, subject to meeting certain requirements.

We address this in a separate page but it largely depends upon whether the sending fund qualifies as a "foreign superannuation fund" (FSF) for Australian tax purposes and if any transfer takes place within 6 months of your becoming resident in Australia. If the overseas fund meets the definition of a FSF and the transfer takes place within 6 months of your becoming resident again, then generally no Australian tax will apply. If the transfer occurs later then you will be taxed on the growth in your funds from the date you became resident, but you can elect for the pension fund to pay the tax at the rate of 15%. If you do not make this election then you will be taxed at your marginal tax rate. In general this means you are better off completing a transfer within the 6 month period, if possible.

If your fund does not meet the definition of a FSF you may be liable for Australian taxation on the entire gain made within the fund, even prior to residency. As mentioned elsewhere, tax advice is an absolute prerequisite to any decision on making a transfer and you should ideally seek advice prior to again becoming an Australian tax resident.

In general, once you start receiving your pension it will form part of your income for Australian taxation purposes and you will pay tax at your marginal rate. If the pension is subject to withholding tax in the country in which it based, then you may qualify for a tax credit in relation to the tax paid in your Australian tax return. You may also be able to apply for some part of your pension to be considered a return of capital or contributions and therefore exempt from tax; this is referred to as the "undeducted purchase price" (UPP) - but you should seek tax advice.

Bear in mind that once an overseas fund moves into "pension mode it will often not be possible to withdraw it as a lump sum and move it to Australia or elsewhere - discuss your individual situation with your pension administrator.

There are very few situations where you can have early access to an Australian superannuation fund and normally your pension funds would not be available for transfer out of Australia and accessible only on retirement post age 60 or at age 65. One exception is individuals in Australia on certain temporary resident visas; they can gain early access to superannuation, but a tax charge of 35% currently applies - with even higher tax levels applying if the they have ever worked on a working holiday visa (WHV).

If you have decided to move permanently overseas and the superannuation retained in Australia is significant in size then we recommend you see a financial planner with a view to ensuring that your investments match your individual requirements. For example, there may be an argument to bias your investment profile towards the currency/region in which you intend to retire, in order to better match your retirement requirements and limit your foreign currency risk.

In the event of death, your superannuation fund will usually be paid out to your nominated beneficiaries either as a lump sum or pension - unless other parties make claims on the Trustees. This can be one of the benefits to transferring a fund to Australia as in some other countries, such as the UK, your qualifying beneficiaries would often receive only a partial pension. The taxable component of your fund will be tax free if paid to a dependent (a spouse is always a dependent) but may be subject to a 16.5% tax if paid to a non-dependent.

We do not base our fees on the value of the funds transferred, as happens with some other firms. Fees are basically a function of complexity, and our approach is to have an initial discussion with you to understand your position in detail, and thereafter provide you with a fixed fee quotation in advance of any advice or services being provided.