Transferring Overseas Pension Funds to Australian Superannuation
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 ("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 pension fund being transferred 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 preface 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 over recent years the Government has also reduced the annual cap on non-concessional contributions to superannuation, which is a category that 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, the contributions may need to be paid over a number of years, and professional advice must be sought to ensure tax effectiveness and compliance.
Bear in mind that the transfer of foreign pension funds into Australian superannuation, even if they do not meet the requirements to be an FSF, can still be appropriate and 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 stems from the fact that payments made from superannuation funds post age 60 will typically be tax free in Australia, and additionally 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 effecting 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.