Superannuation in Australia

14 January 2013
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Overview of Superannuation

Superannuation (or "super" for short) is the process of accumulating a fund for retirement. Although the Australian government does provide an Age Pension, most people expect a higher income in retirement. The Government has introduced tax incentives and employment laws to encourage contributions to super.

Superannuation is a complex issue and we can only cover the basics on this site. However, we have listed some key points that migrants may want to consider and provided links to other sites you can visit for more detail.

Important - Please Read
In Australia, anyone providing financial product advice must be licensed through ASIC (www.asic.gov.au). Aussiemove.com is not a financial advisor and we do not give financial product advice - we do provide general factual information only, obtained from official government sources, such as the ATO (www.ato.gov.au) and statistics from what we believe to be reputable sources. You should consider obtaining independent advice before making any financial decisions.

Our advertisers/sponsors may be Australian or overseas companies that provide services to migrants either before they depart their home country or when they are resident in Australia - the licensing they require will depend on where they are located and where their clients are resident. If you would like to find out about their services, please use the links to contact them directly in order to discuss your own requirements with them.

The Age Pension

How much is it?

The full state Age Pension is $712 per fortnight for a single person or $536.70 each for a couple. But there is an asset test and an income test which may reduce the actual pension payment.

More Information

For more information on the Age Pension, visit the Centrelink website.

Superannuation Basics

The Superannuation Guarantee

By law, employers must pay into a superannuation fund for their employees (there are some exceptions, eg. if salary is very low).

The minimum guarantee rate is 9%, but some employers may guarantee a higher rate - possibly up to 15%.

When considering a job offer, check if the Super Guarantee is on top of the figure you're being offered, or included in it - it makes a big difference!

Self-employed people can also pay into a Super fund and gain the tax benefits.

Funds can be run by the employer (private company or state industry), run by a private fund manager or self-managed by the individual.

Tax Incentives

Contributions to complying superannuation funds are taxed at 15%, which represents a considerable saving for someone on higher tax rates (37% or 45%). Earnings within the fund are also taxed at 15%.

Additional Contributions

There are various ways to top up your Super fund, such as Salary Sacrifice (before tax), additional contributions (after tax), co-contributions. What you can do, how much you can contribute and how tax-effective it is will depend on your employment status and salary.

Access to Benefits

The "Preserved Benefits" of your fund can only be accessed when you reach the "preservation age" - between 55 and 60, depending on when you were born.

Choice of Fund

Legislation introduced in July 2005 enables most employees to choose which fund their Super Guarantee is paid into - see ATO for more.

More Information

For more information on the above points, visit the Superannuation Entry Point on the ATO website, see our links page or contact a financial advisor.

Superannuation Advisors

UHY Haines Norton is an association of independent Chartered Accountant firms in Australia and New Zealand and a member of UHY International Limited, an international network of independent accounting and consulting firms.

The national association was formed in 1984 and it is ranked in the top 25 accounting groups in Australia. We have offices in the six major cities and four regional locations.

UHY Haines Norton Perth provides a full range of migrant services related to tax planning, business migration and pension transfers. Migrants and overseas investors have benefited from our expertise for many years. Please note that we are not financial planners

PENSIONS
We assist clients find UK pension funds, obtain transfer valuations and provide a report to aid decision making. We occupy a unique position in the market; we are totally independent of any financial planning practice and superfund schemes. We can also refer you to specially chosen financial planners, who are fully conversant with UK pension transfers and the various QROPS affairs.

Other services include:

  • Business Migrant Advice
  • Business Development & Strategic Planning
  • Corporate Finance Advice
  • Audit & Assurance
  • Tax Planning & Compliance
  • Retirement & Estate Planning
  • Due diligences, investigations & evaluations
  • Financial Reporting
For further professional advice, please contact us at:
+61 8 9444 3400 | pensions@uhyhn.com.au | www.uhyhnperth.com.au
16 Lakeside Corporate, 24 Parkland Road, Osborne Park, Perth. WA 6017

UK Pension Transfer > Overview

Provided by UHY Haines Norton
Chartered Accountants

If you transfer your pension to Australia

  • In most cases there are major tax benefits in transferring pensions to Australia. Australia introduced legislation (with effect from 1 July 2007) to encourage people to become self sufficient in retirement, and therefore gave pension or superannuation funds major tax free benefits on retirement. When you reach pensionable age or meet a condition of release you can receive 100% of your superannuation tax free.
  • Prior to retirement, earnings are taxed in the fund at 15%.
  • If you do transfer your pension fund to Australia, it should be transferred to a Qualifying Recognised Overseas Pension Scheme (QROPS). This is an Australian superannuation scheme that has obtained approval from HM Revenue & Customs. (We only deal with funds that have QROPS status).
  • Australia imposes limits on the amount that can be transferred tax free to Australia. This is currently $150,000 per annum or a payment of $450,000 as a single sum but with no further contributions for a further 2 years.

    The value that represents the growth component of the fund since your date of residency to the actual date of transfer will not form part of these contributions limits.

    We are able to put arrangements in place to allow for transfers of amounts in excess of these limits from your UK pension fund to a UK holding fund from which the maximum allowable payments under Australian regulations can be made.

  • If you transfer your funds to Australia after 6 months of tax residency, you are taxed on the growth from that date. You can elect for the superannuation fund to pay the tax on the growth at 15% or you can be taxed personally at your marginal rate of tax.

If you leave your pension in the UK

  • When you reach retirement, any growth on the lump sum you receive is not, in most cases, tax free in Australia. The growth element from the date of your Australian tax residency will be taxed at your marginal rate of tax in Australia.
  • The balance of your fund in the UK will, in most cases, purchase an annuity and provide you with a pension for the rest of your life. You will pay tax in the UK and in Australia on your annual pension, at your marginal tax rate. Australia will give you credit for any tax paid in the UK and therefore you will not be double taxed. If you are a permanent resident you can elect under the terms of the double taxation agreement, to be exempt from paying tax in the UK and only be subject to tax in Australia. This is an election that needs to be applied for, we can assist if needed.
  • In most cases pensions cease when the holder dies unless there is a spouse component. Even if this is the case, the majority of pension funds only pay half of the pension sum to the spouse.
  • If you decide to leave your funds in the UK you are subject to tax in Australia on the annual growth of the fund. The financial year runs from 1 July - 30 June, and the growth should be included on your tax return.

Other points to consider

Before deciding whether to transfer your pension fund you should consider:-

  • Exchange rates at time of transfer
  • Earnings of funds in Australia and the UK
  • Flexibility of funds in Australia and UK, (generally Australian funds are more flexible than those in the UK).

PLEASE NOTE:
We are not financial planners. We can refer you to reputable financial planner for investment and planning advice. Alternatively you may wish to use the services of your own financial planner.

The information above is general in its nature and does not constitute specific advice. You are encouraged to consult UHY Haines Norton for advice on specific matters.

For further professional advice, please contact us at:
+61 8 9444 3400 | pensions@uhyhn.com.au | www.uhyhnperth.com.au
16 Lakeside Corporate, 24 Parkland Road, Osborne Park, Perth. WA 6017

UK Pension Transfer > FAQs

Provided by UHY Haines Norton
Chartered Accountants
Can I transfer my UK pension to Australia?
The majority of the pension funds in the UK are capable of being transferred to Australia, including local government, NHS pensions and private pensions.

Can I transfer my British State Pension to Australia?
Unfortunately not! What we can do is obtain a state pension forecast on your behalf to show you what you are entitled to from the UK government when you retire. You may even consider topping up to maximise your entitlement.

Where do my funds go to in Australia?
Your funds have to be transferred to a superannuation fund in Australia which is a Qualifying Recognised Overseas Pension Scheme (more commonly referred to as a QROPS). There are many registered superannuation funds available to choose from. We are able to refer you to independent financial planners who can discuss these funds in more detail.

Can I transfer my UK funds to a Self Managed Superannuation Fund?
Yes you can. We can apply for QROPS status of either an existing Self Managed Superannuation Fund (SMSF) or set up a Self Managed Superannuation Fund on your behalf.

For more information on SMSFs please visit our website www.uhyhnperth.com.au

Am I restricted on the amounts I can transfer to Australia?
The amount transferred in a single transaction must not exceed $450,000 or $150,000 if you are aged 65 or over on 1 July immediately prior to the date the transfer is received.

An annual cap of $150,000 applies for non-concessional contributions made by an individual into super. Members under the age of 65 can make non-concessional contributions totalling $450,000 in a financial year provided no further contributions are made in the following 2 financial years.

It should be noted, however, that the value that represents the growth component of the fund since date of residency to the actual date of transfer will not form part of these contributions limits.

What if the value of my pension is greater than these limits?
Should the transfer value exceed these allowable limits the fund will tax the excess at 46.5%. However, we have arrangements in place to allow for transfers of amounts in excess of these limits to be transferred at a later date.

If I have transferred my pension and decide to return to the UK what happens to my pension?
How your transferred sum will be treated depends on your visa status. Funds returned to the UK can attract tax liabilities both in Australia and UK. You should seek advice before making a decision.

Alternatively you can leave your Superannuation in Australia. This does not apply to Self Managed Superannuation Funds.

Who gets my superannuation when I die or am disabled?
In the event of death, your superannuation fund would be paid to your beneficiaries either as a lump sum or pension. The fund maintains its original value and 100% can be paid to your nominated dependant(s).

On disablement your superannuation can either be paid to you as a pension or lump sum and is tax free.

Is my superannuation subject to death duties in Australia?
There are no death duties in Australia. However certain payments to Non Death Benefit Dependants would be subject to tax at 15% or 30%.

What are the Fees for transferring my funds to Australia?
Our fees are fixed and are not based on the value of the fund. You can arrange with a financial advisor for the fees to be paid on your behalf from the superannuation fund. See our website www.uhyhnperth.com.au or email pensions@uhyhn.com.au for our current charges.

Are there any taxation implications in leaving my funds in the UK?
Yes, the Australian Tax Office (ATO) may tax you on the growth of the fund depending on your circumstances. The lump sum and annuity/pension income you will receive will also be subject to tax in Australia. For further information please refer to our website www.uhyhnperth.com.au.

Does it matter if I am on a temporary visa?
Yes, you will not be subject to tax on the growth of your pension fund. . If you decide to bring your pension to Australia, from a tax point of view you should do so before obtaining your permanent residency. However, there are significant implications should you decide to return to the UK having made the transfer. We recommend you seek advice before making the transfer.

If I decide to transfer my pension to Australia, what should I do next?
Please contact us for a free, no obligation consultation.

For further professional advice, please contact us at:
+61 8 9444 3400 | pensions@uhyhn.com.au | www.uhyhnperth.com.au
16 Lakeside Corporate, 24 Parkland Road, Osborne Park, Perth. WA 6017

UK Pension Transfer > Step-by-Step

Provided by UHY Haines Norton
Chartered Accountants
We have extensive experience in transferring UK pensions to Australia. Our pensions team have dealt with the majority of pension providers in the UK. We can assist you each step of the way to ensure the transfer takes place smoothly and efficiently.
StepDetailsWhat UHY Do
1Meet with UHY Pension Consultant.We will discuss the process with you and the service we provide.
2Complete documentation authorising UHY Haines Norton to act on your behalf.We correspond with the UK Pension holder and request fund values and discharge documentation.
IT CAN TAKE SEVERAL WEEKS FOR UK PENSION PROVIDERS TO SEND US THESE DETAILS
3Receive Pension Transfer ReportWe produce a pension transfer report which provides you with the value of your fund(s), an assessment of any tax liabilities and further information which will aid you with decision making.
4Decide whether to utilize a financial planner.We can work with your financial planner if you have one, or we can provide details of financial planners who understand the pension transfer process for you to select from. Where a financial planner is engaged we will copy all correspondence to that individual.
5Decide whether to proceed with transferYou need to be satisfied that you have all the information and have received appropriate advice as to whether to proceed with transferring your pension before taking the next step.
OUR SERVICES TO THIS POINT ARE WITHOUT OBLIGATION
6Choose a receiving fund with QROPS status. Open an account with them.This will be done by your financial planner in consultation with you. Otherwise you will need to select a fund with QROPS status.
A SUPERANNUATION ACCOUNT MUST BE OPENED BEFORE WE CAN PROCEED FURTHER
7Sign off discharge documentation received by us from the UKWe will complete the discharge documentation for signature. We will liaise with the Australian Superannuation provider and request supporting documentation where necessary. We will send documentation to UK pension provider to facilitate transfer of funds. THIS CAN TAKE SEVERAL WEEKS
8UK pension provider releases funds to Australian Superannuation account.We track the movement of funds from release to receipt by Australian Superannuation account. IT CAN TAKE A NUMBER WEEKS FOR FUNDS TO BE RECEIVED AND CONVERTED FROM GBP TO AUD.
9Tax payment made where necessaryWe calculate any tax due resulting from any growth in your fund(s) since arrival in Australia. We will complete the tax option forms and send to the Superannuation fund for payment to the ATO.
10Invoice raised.Our fees can be paid out of the money transferred if you are using a financial planner. If not you will need to pay us personally.
For further professional advice, please contact us at:
+61 8 9444 3400 | pensions@uhyhn.com.au | www.uhyhnperth.com.au
16 Lakeside Corporate, 24 Parkland Road, Osborne Park, Perth. WA 6017

Superannuation Links

Superannuation Entry Point on the ATO (Australian Taxation Office) website.

www.moneysmart.gov.au - a consumer guide published by ASIC - Australian Securities and Investments Commission (the consumer protection regulator for Australian financial services).

National Information Centre on Retirement Investments.

QROPS

www.hmrc.gov.uk/PENSIONSCHEMES/qrops-list.htm
List of QROPS (Qualifying Recognised Overseas Pension Schemes) published by HM Revenue & Customs in UK.

Disclaimer

Information on this website is intended to give the reader an overview of many aspects of life in Australia, such as healthcare, real estate, tax, superannuation etc.

While we at Aussiemove.com have performed a large amount of research on each subject area, we do not claim to be experts in those fields and we recommend that migrants discuss their requirements with companies specialising in those fields before making purchases, investments or other decisions concerning their move.

The content of this website is general in nature - no specific advice is intended.

We provide links to other companies as a service to our readers. We have taken reasonable care to ensure that each linked website does not contain offensive or inappropriate material. However, we are not responsible for the accuracy of any of the material in any linked website, or the advice that may be contained therein.