Transferring Overseas Pension Funds to Australian Superannuation
We address foreign pension transfers to Australia in detail elsewhere, as Australian expatriates returning from overseas, or migrants moving to Australia, may be in a position to transfer their pension fund balances into Australian superannuation without attracting any tax if the transfer is effected within 6 months of their becoming resident in Australia.
The major prerequisite is that any transfer must come from a pension fund that qualifies as a " foreign superannuation fund" (FSF) for Australian tax purposes. In that situation, you can also elect for earnings accumulated within the fund after you have become resident in Australia (referred to as "applicable fund earnings") to be either taxed at your marginal rate, or within the fund itself at a rate of 15%. This is analogous to the tax that would have been paid had the funds been in a superannuation fund during that period.
In this context it is obviously important to understand how any particular pension fund transfer will be treated for Australian tax purposes. Hence, while UK pension funds will typically qualify as an FSF, there is much less clarity about how other funds, such as 401(k)'s, 403(b)'s and IRA's from the US, Canadian RRSP's and LIRA's, European pensions and Singaporean and Hong Kong provident funds stand from an Australian tax perspective. In these cases specific Australian tax advice must precede any decision to transfer a pension - otherwise, there is some prospect that all earnings within the fund may be subject to marginal Australian tax on transfer.
Note that relatively recently the Government has also reduced the annual cap on non-concessional contributions to superannuation, which is the category that the majority of foreign pension fund transfers fall into, and there are some other requirements that must be met to ensure that any transfer does not attract Australian tax. Consequently, depending upon the capital value of the pension fund transfer, transfers may need to be paid over a number of years, and early professional advice must be sought to ensure tax effectiveness and compliance.
The transfer of foreign pension funds into Australian superannuation, even if they do not meet the requirements to be an FSF, can still be made on a tax effective basis; but much will depend upon your individual circumstances and careful tax planning.
Much of the impetus behind pension transfers to Australia stems from the fact that payments made from superannuation funds post age 60 will typically be tax free in Australia, and because it is usually advantageous to have your pension in the same currency as your expenses; otherwise you have a continuing forex exposure. However, this does not mean that initiating a pension transfer will be advantageous in all situations and you need to be prepared to invest some effort in carefully balancing the issues in your particular circumstances.
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