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What you need to know about pensions. Recent changes to regulations will permit easier transfer of UK Pension Benefit to Australia.

This is good news however the transfer process is still quite onerous with a number of requirements that must be met before transfer is permitted. There is also taxation, Australian Superannuation and Centrelink issues that need to be considered before the decision to transfer are made.


Transfer Requirements

To transfer any UK Pension Benefits to Australia, the following requirements must be met:

  • Permanent departure from the UK with no intention of returning to work or retire;
  • Employment or self-employment in Australia;
  • Australian residency for tax purposes;
  • No part of the UK Benefit commenced paying a pension;
  • Payment directly from the UK scheme to an APRA approved Australian superannuation fund.

Superannuation Issues

Amounts transferred to an Australian superannuation fund from a UK pension fund are classified as undeducted contributions and preserved until a condition of release is met. For a customer to be able to transfer benefits to an Australian superannuation fund, they must satisfy the usual contribution rules such as gainful employment.

As the payment is not considered to be a rollover, the customers’ eligible service period does not include membership in the UK fund or employment with the UK employer.


Tax Implications

There are potentially two areas where a client may be subject to tax upon transfer of UK pension funds. If the transfer is not received by an Australian superannuation fund within six months of the customer becoming an Australian resident, tax is payable on any growth in the UK pension scheme at their marginal tax rate. If part of the payment amount represents an amount that was not fully vested in the member at the time of transfer, the non-vested amount will be subject to contributions tax by the Australian superannuation fund.


Residency

To be considered a permanent resident of Australia for tax purposes, the ATO considers a number of factors including the way a person has arranged their domestic and economic affairs, their employment and their social and living arrangements. No single factor is necessarily decisive.

What if the funds remain in the UK?

A customer can generally access their UK pension benefits upon reaching retirement age. Depending on the rules of the scheme, benefits must be taken either as a pension, or a combination of a lump sum and pension. Under Australia’s double tax agreement with the UK, a UK pension paid to an Australian resident is only taxable in Australia and must be included in the customer’s assessable income. The pension payments may have a deductible amount if they include member contributions. However the pension is not entitled to the 15% rebate which applies to resident pensions. Depending on the nature of the UK fund, if the benefit is left in the UK it may be caught under Foreign Investment Fund legislation.




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