Is Australian Super taxed in the UK

[winter1]

If I decide to return to the UK and draw my Australian Super from my Australian occupational scheme in the UK, will it be fully taxed in the UK even if I am over 60?

 

I have tried to look for answers to this, but I struggle to find any. The Super Fund I have has some contributions that were taxed at the 15% concessional rate and other contributions that were from fully taxed income. Also a lump sum from the sale of a house which is deemed as taxed income.

 

I believe that taken as a Lump sum it would be tax free but maybe not as an income stream and it might not be wise to remove it from a scheme with a good investment history.

 

If it is taxed in the UK then surely this would be tantamount to Double Tax if it were taxed at the full rate?

 

Also as contributions to a UK Super would attract tax relief at Marginal rates this is doubly unjust.

 

Any thoughts or anyone else done this?

 

Thanks

 

Winter1

[Rupert]

It will be taxed in one country or the other, there is no question of it being double taxed. Which country it is taxed in depends upon the specifics of the double taxation treaty for that particular type of income.

 

I believe that a UK pension received by somebody living in Australia, would be taxed in Australia not the UK. Therefore I would have to assume that the opposite applies and in this case you pay tax in UK not Australia. This is just a guess, hopefully someone will confirm shortly.

[winter1]

Rupert,

 

The point is that it has already been taxed in Australia when it was put into super some at 15% and some at 30%.

 

There is no tax relief for such as in the UK.

 

Also if it is drawn in Australia after the age of 60 it is Tax Free.

 

For example 15% tax going in in Australia 20% tax when taken out in the UK therefore 35% tax on a modest income.

The money that was paid in at 30% would then attract 20% on the way out in the UK therefore 50% tax on a modest income.

Hardly fair I am looking to see if there are any concessions.

 

I can understand tax on the earnings but not on the Capital.

Edited January 16, 2013 by winter1

[Flathead]

Rupert,

 

The point is that it has already been taxed in Australia when it was put into super some at 15% and some at 30%.

 

There is no tax relief for such as in the UK.

 

Also if it is drawn in Australia after the age of 60 it is Tax Free.

 

For example 15% tax going in in Australia 20% tax when taken out in the UK therefore 35% tax on a modest income.

The money that was paid in at 30% would then attract 20% on the way out in the UK therefore 50% tax on a modest income.

Hardly fair I am looking to see if there are any concessions.

 

I can understand tax on the earnings but not on the Capital.

I am taxed in Australia on Pension, savings and investments in the UK......what is the difference? I choose to live in Australia therefore I play by that country's rules

[winter1]

I am taxed in Australia on Pension, savings and investments in the UK......what is the difference? I choose to live in Australia therefore I play by that country's rules

 

The Difference here is you received Tax relief when you put your Money in the UK Super.

 

I didn't, I paid tax some at 30% and some at 15%.

 

Surely this is Double Taxation?

[Flathead]

The Difference here is you received Tax relief when you put your Money in the UK Super.

 

I didn't, I paid tax some at 30% and some at 15%.

 

Surely this is Double Taxation?

But I would get a much higher tax free allowance in the UK.....swings and roundabouts.

it is up to you to decide which system suits you best

[winter1]

If you were to put £20000 in a building society you would expect to pay tax on the interest but you would not expect to pay tax on the capital in the account.

This is because you have already paid tax on this when you earned it. This is the same principal as Australian Super is taxed when you contribute to it. You cannot choose which tax regime you obey it is done on residence tests etc.

I don't understand the premise "but would get a higher tax free allowance in the UK" is this on contributions or on receipt of income.

This either assumes I would be contributing to a pension in the UK, which I won't or that the tax free allowance is greater in the UK

which it no longer is under the $18000 dollar tax free threshold from last July.

 

There are vehicles in the UK which recognise this called Purchased life annuities, this is where part of the draw down is deemed capital and is tax free only the investment earnings ie interest is taxed.

 

The original question asked if anybody knew about the tax treatment or had had experience of this situation.

 

 

many thanks

[fizzybangs]

I will be rolling my super into an income stream in Australia and will therefore be deducting a set amount out of it which will be transfered to the UK. As that will be income in the UK, I will have to tell the department of pensions there and my total income (I get a part UK pension) will be what is taxable - that is if my income is over the tax free threshold in UK. If you were to stay in Oz and take it all out then as far as I am aware it is tax free over the age of 60 but then it depends what you do with it! If you are still here on your 65th Birthday then you can apply for the Aussie aged pension - if you leave before your Birthday you can't. Please note everyone that retirement ages now vary depending on when you were born so some people may have to wait until they are 67 for example. If you take it out and keep it in your current account it would become an asset and you probably wouldn't be able to claim a pension because your assets would be too high! If you put it into an income stream, then the same rules apply as above for the UK - only the amount that is withdrawn (either monthly, 3 monthly, annually or whatever you decide) is counted as income and your aged pension here would be reduced slightly depending on how much you withdraw. At the end of the tax year you would get your statement from Centrelink and another from whoeverf you have your income stream and presumably it is all income and therefore taxable - again only if your total income is over the tax free threshold. The remaining capital still in your income stream fund would not be taxable - only the amount withdrawn. This is what super was set up for - to supply an income in your old age. The UK is doing exactly the same although it has a different name etc.

[Thistle13]

This is a great question and so relevant to baby boomers heading back to the UK. I am trying to figure out that is going to be the best option for me but it's so confusing when you have to consider Aust and UK tax. Overall none of us want to pay more tax than we have to, but making the wrong choice can result in just that. I have written to both tax depts asking for a more tailored answer based on my specific circumstances. Not holding much hope for anything other than gobbledygook, but will respond on here if anything interesting comes back. Yes I have Super here and have sold my house and have a term deposit. Do I pull the lot out and take it, or just the savings and draw the super as a pension when I get to the UK, or transfer it to a super find in Uk. Lots of options. Check your preserved age too, that will tell you whether you can draw your money out of super here and the rate it will be taxed at. Preserved age is dependent on the year of your birth. If anyone wants to know where to find their preservation age, let me know.

[winter1]

Thanks to fizzybangs and Thistle13 for the considered responses.

Edited January 18, 2013 by winter1

[Marisawright]

We looked into this exhaustively and I agree, it's confusing.

 

If you're over 60 and take money from your Australian super fund, it gets special treatment, and is not taxable in Australia - as you know. If you have moved to the UK, any money you draw from your super is classed as income. It gets no special treatment.

 

To quote:

 

"The general rule is that where double taxation agreement is available, the country of the pensioner's residence has taxing right in relation to pensions sourced from another country. For example, a UK resident receives an allocated pension from an Australian fund. No tax is payable by the Australia fund, tax on the pension is payable instead by the pensioner in the UK."

 

http://www.ngssuper.com.au/assets/Downloads/Retiring-Overseas.pdf

[winter1]

We looked into this exhaustively and I agree, it's confusing.

 

If you're over 60 and take money from your Australian super fund, it gets special treatment, and is not taxable in Australia - as you know. If you have moved to the UK, any money you draw from your super is classed as income. It gets no special treatment.

 

To quote:

 

"The general rule is that where double taxation agreement is available, the country of the pensioner's residence has taxing right in relation to pensions sourced from another country. For example, a UK resident receives an allocated pension from an Australian fund. No tax is payable by the Australia fund, tax on the pension is payable instead by the pensioner in the UK."

 

http://www.ngssuper.com.au/assets/Downloads/Retiring-Overseas.pdf

 

Thanks for this information

[Thistle13]

Feeling so depressed bout all this pension/super info. Spent the weekend wondering if I should just give up my wish to return to UK. Rules change but unfortunately people caught in the middle are the biggest losers. Turning 60 next year with 25yrs full time working life here and 9yrs in Scotland. With some Super that I stupidly salary sacrificed into hence reducing my savings. So I can't get a full Aussie pension if I go back, can't get a full UK pension, can't take out my Super as there's no longer a DASP (departing Australia super payment). Does anyone know of an advisor who specialises in this subject in outer Sydney area, it's so complex, I'm fearful of making the wrong decision. I have the option of taking upto 12months off work and plan that until I turn 60 when my super would be tax free here.....lots of options. Arghhhhh pulling my hair out

[winter1]

Hi Thistle13,

 

I fully understand how you feel. As I mentioned previously if I decide to leave Oz permanently one of the options would be to draw all the super out after retiring tax free which I believe you can, and take it to the UK and purchase a product in the UK called a "Purchased Life Annuity". This can be drawn down part of the income is recognized as capital and is Tax free only the earnings component is taxed IE interest. The only downside is if you do decide to return to OZ then it becomes taxable in OZ, so you have to be pretty sure the move is permanent.

[Thistle13]

Hi Thistle13,

 

I fully understand how you feel. As I mentioned previously if I decide to leave Oz permanently one of the options would be to draw all the super out after retiring tax free which I believe you can, and take it to the UK and purchase a product in the UK called a "Purchased Life Annuity". This can be drawn down part of the income is recognized as capital and is Tax free only the earnings component is taxed IE interest. The only downside is if you do decide to return to OZ then it becomes taxable in OZ, so you have to be pretty sure the move is permanent.

 

 

Thanks heaps Winter. That's another option for me...an annuity. I really want to just the the H*ll out now. Like I said, I can take 12months off work unpaid leave and that will let me go and still be tecnically employed when I turn 60 next year. That's when I can consider if I want to take my Super out tax free. What I find fascinating, is how do parents in their 50's and 60's of migrants who arrive after their children in either country with none of the super/pension, seem to get all the benefits and money to live.

[Guest guest68546]

Hi Thistle13,

 

I fully understand how you feel. As I mentioned previously if I decide to leave Oz permanently one of the options would be to draw all the super out after retiring tax free which I believe you can, and take it to the UK and purchase a product in the UK called a "Purchased Life Annuity". This can be drawn down part of the income is recognized as capital and is Tax free only the earnings component is taxed IE interest. The only downside is if you do decide to return to OZ then it becomes taxable in OZ, so you have to be pretty sure the move is permanent.

I'm a bit away from retiring but I like to keep abreast of financial matters and the last time I looked at annuities they were not that great. Admittedly it wasn't recently but I cannot imagine they will have improved; if anything they will be poorer. Are you not allowed to retire, take money from Oz super, stick it in a bank account and then transfer it to Uk without the need to put it into a Uk pension pot or take out an annuity? Or am I being too simplistic?

[winter1]

I'm a bit away from retiring but I like to keep abreast of financial matters and the last time I looked at annuities they were not that great. Admittedly it wasn't recently but I cannot imagine they will have improved; if anything they will be poorer. Are you not allowed to retire, take money from Oz super, stick it in a bank account and then transfer it to Uk without the need to put it into a Uk pension pot or take out an annuity? Or am I being too simplistic?

 

I am aware of that but there are differences between standard annuities and Purchased Life Annuities.

 

read this link

http://www.investmentsense.co.uk/retirement-centre/thinking-about-retirement/purchase-life-annuities/#

 

It may also be wise to get proper advice but this could be an option if you want to protect your capital and unlike standard annuities if you haven't drawn all the money in your pot then your estate will get the balance.

[Guest guest68546]

I am aware of that but there are differences between standard annuities and Purchased Life Annuities.

 

read this link

http://www.investmentsense.co.uk/retirement-centre/thinking-about-retirement/purchase-life-annuities/#

 

It may also be wise to get proper advice but this could be an option if you want to protect your capital and unlike standard annuities if you haven't drawn all the money in your pot then your estate will get the balance.

 

Thanks for the link

[Thistle13]

for anyone thats interested in checking for lost super. The ATO has made it easy by introducing a brand new whoopy doo portal to check for yourself. go to their website at http://www.ato.gov.au. under online services, register as an individual. You will need some info like your TFN as identifiers, once logged in, it will give you info about lost super reported to the ATO and gives you the option to request an electronic transfer from closed super accounts to your active ones.

[winter1]

Hi,

No I don't think so.There is no question of it being double taxed they would be paid tax just like in other country. The tax might depends upon the specifics of the double taxation treaty for that particular type of income.I believe that a UK pension received by somebody living in Australia, would be taxed in Australia not the UK. Therefore I would have to assume that the opposite applies and in this case you pay tax in UK not Australia. This is just a guess, hopefully someone will confirm shortly.

 

1. I think the point is here that an Australian Occupational Superannuation scheme has tax deducted when you or your employer contribute.. so any money going in is taxed albeit at 15% on concessional contributions. However if you put any money in from a something like a sale of a house or car then you will be putting money in from funds that have been fully taxed.

 

2. If you remain in Australia this super fund can pay you an income once you turn 60 totally free of income tax.

 

3. If you move to the UK then it will be taxed as an income stream at normal rates.

 

4. If instead of putting that money in super you had put it in the bank then you could draw it down whenever you want without it incurring tax.

 

5.OK you will have received some concessional tax relief on some of it but will still have paid at least 15% on it and may well have paid 30% on it and then you get taxed again in the UK at at least 20%.

 

6. If you have paid into a UK pension fund whilst working in the UK you get full Tax relief at your highest rate up to 50% so yes it would be fair to pay tax on this as you have already had your tax relief.

 

7. There are financial instruments in the UK that recognize you have paid tax on certain investments i.e. Purchased Life Annuities (not to be mixed up with common or garden annuities).

 

the question I put was to see if anyone knew if there were certain exemptions on Australian Occupational super. If you have an Australian state pension then I would expect to pay tax on it or any other pension for that matter it is just the way that Australian super is taxed. Maybe it would be fairer to tax it at a sliding scale from 5%.

[Linday]

Thanks heaps Winter. That's another option for me...an annuity. I really want to just the the H*ll out now. Like I said, I can take 12months off work unpaid leave and that will let me go and still be tecnically employed when I turn 60 next year. That's when I can consider if I want to take my Super out tax free. What I find fascinating, is how do parents in their 50's and 60's of migrants who arrive after their children in either country with none of the super/pension, seem to get all the benefits and money to live.

 

My husband and I are such parents, having arrived here almost 2 years ago.We certainly are not entitled to any benefits in Australia . First of all it cost us around 50,000 British pounds for our visa, which is to offset the fact that we have not paid into Medicare. In addition there is a bond of $14,000 which is only returned after 10 years if certain benefits are not taken. We draw our pensions from the UK, having worked all our lives and as such are taxed on this in Australia. Plus our state pension is frozen at the level at which it was when we left the UK, so in real terms it is actually reducing each year. We would only be entitled to the Australian Aged Pension after 2 years. As such we are finding it very expensive here in Australia.

[Quoll]

My husband and I are such parents, having arrived here almost 2 years ago.We certainly are not entitled to any benefits in Australia . First of all it cost us around 50,000 British pounds for our visa, which is to offset the fact that we have not paid into Medicare. In addition there is a bond of $14,000 which is only returned after 10 years if certain benefits are not taken. We draw our pensions from the UK, having worked all our lives and as such are taxed on this in Australia. Plus our state pension is frozen at the level at which it was when we left the UK, so in real terms it is actually reducing each year. We would only be entitled to the Australian Aged Pension after 2 years. As such we are finding it very expensive here in Australia.

The Australian Aged benefit has a 10 year residence requirement unfortunately so you have another 8 yrs to go if you have only been resident for 2 yrs

[Linday]

The Australian Aged benefit has a 10 year residence requirement unfortunately so you have another 8 yrs to go if you have only been resident for 2 yrs

 

Yes, sorry, I did know that - it was an error. I doubt if we would get anything anyway as it is means tested, nor do we expect to.

[mike255]

1. I think the point is here that an Australian Occupational Superannuation scheme has tax deducted when you or your employer contribute.. so any money going in is taxed albeit at 15% on concessional contributions. However if you put any money in from a something like a sale of a house or car then you will be putting money in from funds that have been fully taxed.

 

2. If you remain in Australia this super fund can pay you an income once you turn 60 totally free of income tax.

 

3. If you move to the UK then it will be taxed as an income stream at normal rates.

 

4. If instead of putting that money in super you had put it in the bank then you could draw it down whenever you want without it incurring tax.

 

5.OK you will have received some concessional tax relief on some of it but will still have paid at least 15% on it and may well have paid 30% on it and then you get taxed again in the UK at at least 20%.

 

6. If you have paid into a UK pension fund whilst working in the UK you get full Tax relief at your highest rate up to 50% so yes it would be fair to pay tax on this as you have already had your tax relief.

 

7. There are financial instruments in the UK that recognize you have paid tax on certain investments i.e. Purchased Life Annuities (not to be mixed up with common or garden annuities).

 

the question I put was to see if anyone knew if there were certain exemptions on Australian Occupational super. If you have an Australian state pension then I would expect to pay tax on it or any other pension for that matter it is just the way that Australian super is taxed. Maybe it would be fairer to tax it at a sliding scale from 5%.

 

This is a great question but somehow got sidetracked a little. Does anyone know whether Australian super (already taxed at 15%) is taxed by UK Govt, if the super is drawn when the pensioner in the UK ?

[NickyNook]

This is a great question but somehow got sidetracked a little. Does anyone know whether Australian super (already taxed at 15%) is taxed by UK Govt, if the super is drawn when the pensioner in the UK ?

 

Yes. It is.

See post #8 and #11.