Is Australian Super taxed in the UK

[mike255]

Yes. It is.

See post #8 and #11.

 

Thanks Nicky

Even though contributions to super have been already taxed at 15%, and any "after tax" voluntary contributions paid into super, are taxed again when the super drawn. Effectively pensioners become "double taxed" if they become UK resident. I can see why people would be a bit upset about this.

Do you know whether the UK taxes the super or pension at the marginal rate (say 20% or 40%) and subtracts the Aus tax already paid ? or offers any allowance of any kind ?

Cheers

Mike

[NickyNook]

Thanks Nicky

Even though contributions to super have been already taxed at 15%, and any "after tax" voluntary contributions paid into super, are taxed again when the super drawn. Effectively pensioners become "double taxed" if they become UK resident. I can see why people would be a bit upset about this.

Do you know whether the UK taxes the super or pension at the marginal rate (say 20% or 40%) and subtracts the Aus tax already paid ? or offers any allowance of any kind ?

Cheers

Mike

 

No - sorry, I'm no expert on UK tax.

 

You will get the UK personal allowance which will reduce the tax due, of course. But, I'd imagine, that as Australia doesn't tax the income stream from super, there will be no Australian tax paid to subtract.

 

I know that Australia allows a tax deduction for the undeducted purchase price of some overseas pensions - but whether the UK does the same, I have no idea.

Edited October 25, 2013 by NickyNook

[Guest Jean95]

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 have just done this. We returned to the UK a couple of weeks ago. I officially retired since I was over 55 and took all the money out of super before we left and transferred it to the UK.

[Pam W]

Hi everyone yes excellent responses. I wonder if anyone knows of a financial advisor I could see . I want to go back to Uk next year. I will be 61. I am selling up here and then buying a smaller cheaper house in UK.I am entitled to a small Nhs pension and I think part uk pension ,maybe even a bit of oz pension. I worked 33 years here full time and 12 years in uk. But not sure of best way to manage it all. Any advice or pointers in the right direction would be much appreciated.

many thanks

Pam

[winter1]

Hi everyone yes excellent responses. I wonder if anyone knows of a financial advisor I could see . I want to go back to Uk next year. I will be 61. I am selling up here and then buying a smaller cheaper house in UK.I am entitled to a small Nhs pension and I think part uk pension ,maybe even a bit of oz pension. I worked 33 years here full time and 12 years in uk. But not sure of best way to manage it all. Any advice or pointers in the right direction would be much appreciated.

many thanks

Pam

 

Hi Pam,

If you have already reached 60 then as a female you will already be able to claim your UK pension and I am assuming also the NHS pension. I note in another post you were already aware of the reciprocal agreement that ended in 2001.

 

You may also like to have a look at this link that shows the UK chancellor has announced the intention to allow anyone retiring before 2016 the ability to top up their UK Basic state pension with a one of payment of £700 for £190 per year increase. This is a one off for a short window. http://www.telegraph.co.uk/finance/personalfinance/pensions/10497646/Autumn-Statement-2013-Over-60s-offered-cheap-state-pension-boost.html

 

 

 

I also paid class 2 voluntary contributions for a few years till I reached the 35 year National insurance level for a full pension. not sure what that costs now but it only cost me around £400 in total to get an extra worth around £835 per year in pension at today's rate.

may be worth investigating.

Good luck

[Pam W]

Excellent advice I will look into doing that. Thanks very much

pam

[mike255]

Excellent advice I will look into doing that. Thanks very much

pam

 

Note of caution. we need to refer to the new white paper on pensions, now going through House of lords. The small print suggests that although 35 years of qualifying years is required to get the full pension, this is only for people who didn't opt out of SERPS (time paying into an occupational pension). if you opted out for part of those years then the statepension may be reduced. On the other hand payments to aus will not be index linked either.

[fourcandles]

I have just done this. We returned to the UK a couple of weeks ago. I officially retired since I was over 55 and took all the money out of super before we left and transferred it to the UK.

 

Jean, that's sound interesting. Is there definitely no UK tax implications doing what you have done? If not its definitely something else to consider. Hope the move back has gone well!

[BillW]

Hello,

 

Last post was over 12 months ago.

 

I've just started thinking about this issue - any new developments / thoughts / recommended web pages / recommended advisors etc. etc. etc. during the last 12 months ?

 

Bill

[Chortlepuss]

I'd appreciate knowing more about this too! There's a fortune to be made by clued up financial advisors in guiding all us boomers through the best options....

[Marisawright]

I'd appreciate knowing more about this too! There's a fortune to be made by clued up financial advisors in guiding all us boomers through the best options....

 

I have just about driven myself crazy working out all the permutations of this! I did get a recommendation for a financial adviser here, rang him and he told me I needed a tax accountant instead, so bear that in mind. However he did answer a lot of my questions.

 

I'm now very clear about the following:

 

1. If you're going back to the UK, make sure you dispose of any investment properties or shares in Australia while you're still resident. If you keep them, Australia will charge you 30% tax on all income (no tax-free threshold), AND if you subsequently sell them, you'll pay capital gains on 100% of the profit.

 

2. It's OK to keep money in bank accounts, provided that's the ONLY investment you have left in Oz (excluding super). In that case, the bank will withhold 10% of the interest and that's it - no Aussie tax return required. However you will need to declare it on your UK tax return (you also declare the tax paid so the UK don't tax it twice). Note that if you have ANY other investments in Australia as well as the bank accounts, you'll pay 30% on the bank interest as well!

 

3. Superannuation - if your super is with a retail or industry fund, while your super is sitting in your super account, you don't have to declare it for tax in either country. N.B. If your fund is a self-managed super fund, the rules are different. Basically you must get rid of it - otherwise you will pay Australian tax at 46%.

 

4. If you convert your super to a pension, those payments will be taxed by the UK as ordinary income.

 

5. If you move from Australia to the UK before you reach pension age, wave goodbye to your Australian government pension - you will never be able to claim it. However provided you made some NI contributions in the past, you can claim your pre-2001 Australian work record towards a UK pension.

 

The next bit is where it gets confusing. This is what I think I know:

 

1. If you take your superannuation as a lump sum before you leave Australia, it's tax free. Once it's in your Aussie bank account, it's just savings. If you wait until after you're in the UK before taking the lump sum, the UK government will want a slice - I'm still not clear how much tax and when it's calculated from.

 

2. If you leave a large amount of savings in an Australian bank account and subsequently transfer it to the UK, you may be hit for capital gains on the foreign exchange profit. We're not going to worry about this, because the interest we get on an Aussie bank account is so much greater than we could get in the UK, we feel we'll still be better off.

Edited January 17, 2015 by Marisawright

[Chortlepuss]

I have just about driven myself crazy working out all the permutations of this! I did get a recommendation for a financial adviser here, rang him and he told me I needed a tax accountant instead, so bear that in mind. However he did answer a lot of my questions.

 

 

The next bit is where it gets confusing. This is what I think I know:

 

1. If you take your superannuation as a lump sum before you leave Australia, it's tax free. Once it's in your Aussie bank account, it's just savings. If you wait until after you're in the UK before taking the lump sum, the UK government will want a slice - I'm still not clear how much tax and when it's calculated from.

 

2. If you leave a large amount of savings in an Australian bank account and subsequently transfer it to the UK, you may be hit for capital gains on the foreign exchange profit. We're not going to worry about this, because the interest we get on an Aussie bank account is so much greater than we could get in the UK, we feel we'll still be better off.

 

Very informative, thanks. We are heading back to UK in 2016 but will not have retired. My hubbie can get a sabbatical for his Oz job for up to 3 years. By then he'll be able to cash in his Australian super, so we are considering the possibility of returning to Oz after 3 years, working a year or so and then cashing in the super and retiring....back to UK Alternative is to let the super run and then just have it paid from Australia (and we'll have to pay UK income tax). It's not easy!!

[Guest]

Very informative, thanks. We are heading back to UK in 2016 but will not have retired. My hubbie can get a sabbatical for his Oz job for up to 3 years. By then he'll be able to cash in his Australian super, so we are considering the possibility of returning to Oz after 3 years, working a year or so and then cashing in the super and retiring....back to UK Alternative is to let the super run and then just have it paid from Australia (and we'll have to pay UK income tax). It's not easy!!

I believe if you come back to Australia and live for a year prior to reaching Aus pension age you can claim your Aus Gov pension if you're eligible for one and take it back to the UK.

[BillW]

I believe if you come back to Australia and live for a year prior to reaching Aus pension age you can claim your Aus Gov pension if you're eligible for one and take it back to the UK.

 

Hello,

 

Residence requirements are summarised here

 

https://www.dss.gov.au/our-responsibilities/seniors/benefits-payments/age-pension

 

Pasted below

[h=3]Residence Requirements[/h] To qualify for the Age Pension you must be an Australian resident (that is, living in Australia on a permanent basis) and in Australia on the day the claim is lodged, and must also satisfy one of the following:

 

 

• be an Australian resident for a total of at least 10 years, with at least five of these years in one period; or

• have a qualifying residence exemption; or

• be a woman who is widowed in Australia when both she and her late partner were Australian residents, and who has 104 weeks residence immediately before the claim; or

• be receiving Widow B Pension, Widow Allowance or Partner Allowance immediately before reaching pension age.

 

Special rules apply to residence in countries with which Australia has an International Social Security Agreement. Residence in these countries may count towards the minimum 10-year residence requirement.

 

You also have to be resident and in Australia on the day you apply for it.

 

Bill

[BillW]

I have just about driven myself crazy working out all the permutations of this! I did get a recommendation for a financial adviser here, rang him and he told me I needed a tax accountant instead, so bear that in mind. However he did answer a lot of my questions.

 

 

<snippped>

 

.

 

Hello,

 

You can use a good search function to find British Tax Accountants who specialise in international personal tax here

 

http://www.tax.org.uk/ this is the home page

 

http://www.tax.org.uk/about_the_ciot use the search function 2nd option down in green box on the left one of the keys you can search on is international personal tax

 

Maybe we can persuade one of them to post some info for us

 

Bill

[BillW]

Hello,

 

I started another similar thread on this topic, here http://britishexpats.com/forum/moving-back-uk-61/australian-superannuation-treatment-uk-850849/#post11536489, and have had a useful response with some good links in it.

 

Worth a look.

 

Bill

[Marisawright]

I believe if you come back to Australia and live for a year prior to reaching Aus pension age you can claim your Aus Gov pension if you're eligible for one and take it back to the UK.

 

Actually it's TWO years. You can come back to Australia and claim the pension on day 1, but you then have to stay for two years - otherwise they'll take it away again.

[Marisawright]

Very informative, thanks. We are heading back to UK in 2016 but will not have retired. My hubbie can get a sabbatical for his Oz job for up to 3 years. By then he'll be able to cash in his Australian super, so we are considering the possibility of returning to Oz after 3 years, working a year or so and then cashing in the super and retiring....back to UK Alternative is to let the super run and then just have it paid from Australia (and we'll have to pay UK income tax). It's not easy!!

 

We could cash ours out now, but we're not going to. We figure that if we take the lump sum over to the UK, we would get a rotten interest rate there - whereas left in our super, it will earn at a much higher rate. We won't need the money for a while, at least until we buy a house, and we're not going to rush into that.

 

We'll convert it to a pension later on, and will pay UK tax on that: but we figure that we'll have been earning higher interest on it for some time, so that will help offset any tax.

 

Our main worry is not getting the Aussie pension. You can imagine the cost of coming back to Australia for two full years - it would cost as much as a permanent move - so we won't be doing that. However we've done the pension calculator and it's unlikely we'd get the full Aussie pension for several years anyway: I'll be much better off using my Australian experience to get the UK pension, which I'll get from day 1.

 

We've read something about my oh being able to claim it too, if he works for a year after we arrive: but I haven't been able to find confirmation of that.

[Guest]

Actually it's TWO years. You can come back to Australia and claim the pension on day 1, but you then have to stay for two years - otherwise they'll take it away again.

Oh ok i thought if you came back and lived for the year before you could claim it you could take it with you once it was all up and running.

[Bridgeman]

We brought a UK private pension over from the UK and invested it in a Oz Super from which I am now drawing a pension. We were told that if we returned to the UK within 2 years of starting to draw the pension tax free then we would have to repay all the tax which would have been due on it. Can anyone confirm this?

[Marisawright]

Oh ok i thought if you came back and lived for the year before you could claim it you could take it with you once it was all up and running.

 

No, if you come back and live for a year before you claim it, you'll still have to stay for one more year or they'll take it away from you. The rule is you have to be in the country the day you claim, and you have to be resident for two full years around that time, either before or after or during.

[Marisawright]

We brought a UK private pension over from the UK and invested it in a Oz Super from which I am now drawing a pension. We were told that if we returned to the UK within 2 years of starting to draw the pension tax free then we would have to repay all the tax which would have been due on it. Can anyone confirm this?

 

I suspect that's probably true.

[Guest]

No, if you come back and live for a year before you claim it, you'll still have to stay for one more year or they'll take it away from you. The rule is you have to be in the country the day you claim, and you have to be resident for two full years around that time, either before or after or during.

Thank you Marisa for your advice seems i was informed wrongly and you are completely correct. Cheers.

[BillW]

Am beginning to think I may have over reacted to this issue.

 

In UK you each get 10,000 pounds tax free then the money you earn on top of that is taxed at 20% ?

 

So if you budget to live on 30,000 per year thats 15,000 each

 

So that is tax of 20% on 5000 pounds that is 1,000 pounds tax each.

 

In my overall big picture that is a relatively cheap price to pay for being able to live where I want, and, for us, that means getting away from what has become an annual bushfire worry - we spent approx $1000-$1500 per year for the last few years when we flit to a caravan park on the extreme fire danger days - "Leave and Live" - well worth it for the peace of mind. For the other 10 months of the year our place is a paradise, but it takes a lot of energy that I no longer have to look after it.

 

So maybe everyone could have a look at their own big picture spreadsheet and see if the "TAX !!!! HORROR SHOCK NO WAY WILL I PAY TAX !!!!!!! " reaction is warranted, and are you depriving yourself of something you'd enjoy for the sake of tax minimisation.

 

I know it can become a bit of a passion to minimise tax, but the danger becomes that I spend my retirement minimising tax instead of enjoying myself as much as I possibly can before pegging out with my last 5 cents in the bank, and yes you have to do some planning to achieve that and it does involve attention to taxes.

 

I will always remember one financial planner recommending planning on spending up and enjoying your early retirement before your "Deep old age" - wonderful turn of phrase.

 

Maybe I've got this all wrong ? Are there other implications ie will UK try to make me pay tax on the earnings of my funds rather than on the withdrawals ? We dont have SMSF we are self funded retirees using industry funds to hold our retirement money.

 

Must admit I've gone back to being willing to pay 2000 pounds per year to live in a cooler climate as long as I've understood it properly. In my big picture spreadsheet that cost is offset by other costs I won't have to pay any more. But everyone has their own scenario to model and for some the costs may not balance out.

 

Leaving funds in Aussie super does bring up other issues - ie 20-40 years of the following : currency exchange risks, double the legislative risk with 2 governments involved, transfer costs, management & communication between Britain & Aus. any others ?

 

Will be talking to British tax accountants in May when we go back for holiday, and will post back whatever I learn.

 

Bill

[Marisawright]

Am beginning to think I may have over reacted to this issue.

 

In UK you each get 10,000 pounds tax free then the money you earn on top of that is taxed at 20% ?

 

So if you budget to live on 30,000 per year thats 15,000 each

 

So that is tax of 20% on 5000 pounds that is 1,000 pounds tax each.

 

In my overall big picture that is a relatively cheap price to pay for being able to live where I want...

 

So maybe everyone could have a look at their own big picture spreadsheet and see if the "TAX !!!! HORROR SHOCK NO WAY WILL I PAY TAX !!!!!!! " reaction is warranted, and are you depriving yourself of something you'd enjoy for the sake of tax minimisation. . .

 

 

 

 

Exactly! People can get obsessed with avoiding tax, even when it's not beneficial - you only have to look at negative gearing. If you do it intelligently (so your "loss" is only on paper) it can be very profitable, but I see too many people making a real loss on their property and thinking that means they're somehow ahead, just because they paid no tax. Whereas there's no guarantee their capital gain will offset that cost in the long run.

 

Good luck with the accountants.