JB46 Posted November 18, 2015 Share Posted November 18, 2015 I am shortly returning to the Uk after many years in Australia and intended to use superannuation funds to finance the purchase of a property. It seems however that having spent 3 months this UK financial year in the UK I will become a resident and therefore liable to UK tax laws which on the face of it would tax my superannuation funds transfer as income and therefore liable to pay tax. Does anyone have experience of this situation and any practical advice? Link to comment Share on other sites More sharing options...
scuffythetugboat Posted November 18, 2015 Share Posted November 18, 2015 Bump Link to comment Share on other sites More sharing options...
BacktoDemocracy Posted November 18, 2015 Share Posted November 18, 2015 I am shortly returning to the Uk after many years in Australia and intended to use superannuation funds to finance the purchase of a property. It seems however that having spent 3 months this UK financial year in the UK I will become a resident and therefore liable to UK tax laws which on the face of it would tax my superannuation funds transfer as income and therefore liable to pay tax. Does anyone have experience of this situation and any practical advice? I believe that you have to be resident in uk for 6 mths out of 12 to be considered resident for tax purposes and as you will be permanently resident you will be a tax resident but there is a dual tax arrangement between uk and oz so you pay tax in only one location and as proceeds from super are not taxed in oz you do not have to pay tax in uk, i emphasise that is my understanding, i have always stated to the bank that monies are from sale of house which is tax exempt in oz and uk, i would suggest an off shore sterling account with either tsb operating out of singapore (or they used to) or hsbc as best way to move monies around, tsb is cheapest and most obliging. I have found moneycorp and hifx best for currency exchange as to rates and as funds are paid into your sterling offshore bank account from a uk bank. Link to comment Share on other sites More sharing options...
NicF Posted November 18, 2015 Share Posted November 18, 2015 @Marisawright has a lot of knowledge in this area and would probably be able to help. Link to comment Share on other sites More sharing options...
Marisawright Posted November 19, 2015 Share Posted November 19, 2015 @Marisawright has a lot of knowledge in this area and would probably be able to help. I'm not sure I'd go that far! However I have looked into transferring super and I'm afraid that yes, if you are classed as resident in the UK, you will get hammered for tax on your super lump sum. @JB46 - You say you've only been in the Uk for 3 months this financial year, which wouldn't class you as resident - but I assume you mean that you'll be moving to the UK permanently during the same financial year, so that's why you'll get caught? Is there any way you could delay your return until AFTER the end of the UK financial year? That way, you could cash out your lump sum this year in Australia, put it in the bank, then transfer it next year as liquid funds and there'd be no tax to pay. Link to comment Share on other sites More sharing options...
JB46 Posted November 19, 2015 Author Share Posted November 19, 2015 @Marisawright has a lot of knowledge in this area and would probably be able to help. Thanks for the comments from everyone. As they say a little knowledge can be dangerous and I have spent a lot of time on the internet and talking to people to try to get this sorted. The issue for tax liability in the UK is your residency status as Marisa points out. For anyone interested the UK TO form RDR3 - Statutory Residency Test is the central source of information. The TO has specialist advisers who have been very helpful and apparently the High Commission in London can also provide detailed information. For an expat who has no immediate family or property or work ties to the UK the residency test is time based, if I spend more than 183 days in a UK tax year (April) then I am classed as a resident and any monies brought into the country in that tax year are classed as income - definitely not something you want to expose substantial sums to. There will always be a window to sort out financial affairs, but it is clear that this has to be done before you achieve residency. By the way days are classed as being in UK at midnight and any trip outside the UK doesn't count so if you do get under the pump a trip to Europe can get you out of trouble. For my situation I cannot leave funds in Australia that might be needed as a lump sum at some time in the future. They all need to be brought over by April 2016 to avoid tax. This is a bit confronting given the benign tax regime in Australia for superannuation, however that's just how it is. So that's got the belt sorted, but now for the braces with a few more phone calls and find out how much this is all going to cost. Link to comment Share on other sites More sharing options...
Chortlepuss Posted November 20, 2015 Share Posted November 20, 2015 I'm not sure I'd go that far! However I have looked into transferring super and I'm afraid that yes, if you are classed as resident in the UK, you will get hammered for tax on your super lump sum. @JB46 - You say you've only been in the Uk for 3 months this financial year, which wouldn't class you as resident - but I assume you mean that you'll be moving to the UK permanently during the same financial year, so that's why you'll get caught? Is there any way you could delay your return until AFTER the end of the UK financial year? That way, you could cash out your lump sum this year in Australia, put it in the bank, then transfer it next year as liquid funds and there'd be no tax to pay. So Marisa if we come back to Australia before retirement to work for a year or 2 cash in our super at retirement age and put it into the bank, then transfer it back to the UK we don't have to pay any tax on it? Link to comment Share on other sites More sharing options...
Marisawright Posted November 20, 2015 Share Posted November 20, 2015 The issue for tax liability in the UK is your residency status as Marisa points out.... if I spend more than 183 days in a UK tax year (April) then I am classed as a resident and any monies brought into the country in that tax year are classed as income - definitely not something you want to expose substantial sums to. For my situation I cannot leave funds in Australia that might be needed as a lump sum at some time in the future. They all need to be brought over by April 2016 to avoid tax. This is a bit confronting given the benign tax regime in Australia for superannuation, however that's just how it is. So what you're saying is, you WILL be able to avoid being classed as a resident this UK financial year? That's good news, so all you need to do is notify your super fund of your intention to take a lump sum, and direct them to put it in the bank of your choice. Then you'll need a third party foreign exchange company to move the money into sterling - because the banks themselves charge far too much in fees. I can't recommend Moneycorp highly enough - they looked after me very well, and if you join through this forum, you will pay no commission on transfers. http://www.pomsinoz.com/forum/money-transfer-ask-moneycorp/197057-moneycorp-launches-fee-free-australian-currency-service-poms-oz.html Because the money you transfer OUT of your Australian bank account is in AU$, and the amount you transfer IN to your British account is in £ sterling, you won't be up for fees from either of your banks. I must confess I got myself tied in knots doing my transfer online (on my old steam-driven PC) and ended up doing it all by phone and email but it still worked well. I particularly liked the fact that I was able to transfer the money to a Moneycorp sterling account and leave it sitting there securely until I got my UK bank account organised. Link to comment Share on other sites More sharing options...
scuffythetugboat Posted November 21, 2015 Share Posted November 21, 2015 Does the Inland Revenue know when you are in or out of the country, or is it down to the individual to tell them? Entering and leaving Australia is clocked to the minute, but entering and leaving the UK is done with a glimpse of a passport and off you go. I ask because I returned to live in the UK some years ago and transferred all my money from Australia to the UK in the July of that year. No demands or tax to pay, no one asked me and I didn't confess to something that I was ignorant about and I'm still a free man with all my money. It must be the honest people that have to pay I suppose because they tell the taxman everything. Link to comment Share on other sites More sharing options...
Marisawright Posted November 21, 2015 Share Posted November 21, 2015 I think these days with all the money laundering, they're far more diligent about investigating large money transfers. Link to comment Share on other sites More sharing options...
Marisawright Posted November 21, 2015 Share Posted November 21, 2015 So Marisa if we come back to Australia before retirement to work for a year or 2 cash in our super at retirement age and put it into the bank, then transfer it back to the UK we don't have to pay any tax on it? It all depends on your residency status. If the UK govt determines your absence is just temporary (eg you've kept your home in the UK), you could still be liable for tax. Remember I'm not an,expert though! Link to comment Share on other sites More sharing options...
BacktoDemocracy Posted November 21, 2015 Share Posted November 21, 2015 I think these days with all the money laundering, they're far more diligent about investigating large money transfers. I can only refer to my previous post. Link to comment Share on other sites More sharing options...
scuffythetugboat Posted November 21, 2015 Share Posted November 21, 2015 I think these days with all the money laundering, they're far more diligent about investigating large money transfers. I can't see it myself. The Inland Revenue staff population has been culled so much in recent years that they are now on the endangered species list. Link to comment Share on other sites More sharing options...
scuffythetugboat Posted November 21, 2015 Share Posted November 21, 2015 What I'm really saying is that any ordinary bloke wouldn't know about such a complicated tax rule so why find out about it and then confess, thus, giving your money away. Link to comment Share on other sites More sharing options...
Ken Posted November 21, 2015 Share Posted November 21, 2015 .... there is a dual tax arrangement between uk and oz so you pay tax in only one location and as proceeds from super are not taxed in oz you do not have to pay tax in uk,...... Sorry, but the point of a double taxation treaty is to stop you from being taxed twice not to avoid tax altogether. Where you haven't been taxed at all in one country you still have to pay the full amount of tax in the other country - and if you've only paid a low rate of tax in one country you have to pay the full amount of tax less the low rate you've paid in the other country. Link to comment Share on other sites More sharing options...
Marisawright Posted November 21, 2015 Share Posted November 21, 2015 What I'm really saying is that any ordinary bloke wouldn't know about such a complicated tax rule so why find out about it and then confess, thus, giving your money away. Because I might get caught !? You were lucky and got away with it. Personally I wouldn't be willing to risk transferring several thousand bucks and then just cross my fingers that I wouldn't get found out - as the result could be 20% or 30% tax plus a hefty fine. If it was a few hundred yes, but not my whole pension bucket, I can't risk losing half of that! I'm not saying I would declare it, I'm saying I would try to find a way to do it legally and not be liable for tax in the first place. Link to comment Share on other sites More sharing options...
Marisawright Posted November 21, 2015 Share Posted November 21, 2015 I can only refer to my previous post. I missed part of it, sorry! Your description of the double taxation agreement is not how it was explained to me at all. The problem with Australian super IS the fact that it's not taxed in Australia. The way the system works is that you declare your Australian income on your UK tax return, and you also declare the Australian tax you paid. The Inland Revenue sees that and won't tax you because Australia already has. If you haven't paid Australian tax on it, you'll have to pay the tax due under British tax law on that amount. With your super, you've paid no Australian tax on it. The Inland Revenue don't care WHY you haven't paid tax on it - so they will tax it under UK rules. Edit: I notice Ken has posted to say the same. He's an accountant so he knows better than me. Link to comment Share on other sites More sharing options...
scuffythetugboat Posted November 21, 2015 Share Posted November 21, 2015 With 56000 tax jobs on the line who's going to ask you about your money? Try going onto the Inland Revenue website to find out about transferring money from Australia to the UK, you won''t get far, so if 56000 tax office employees who could perhaps answer your question get the boot who are you going to confess to? There's no one answering the phone calls now, let alone in the future. I'm no tax dodger, in fact when I'm paying 49c in the dollar I'm over the moon because I'm earning and paying tax which is one of the foundations of civilised society, but why go and root out a tax rule that no one has heard of and ask them to take more money off you? Costa Coffee wouldn't do it. Just out of interest. Anyone out there confessed or been caught? Link to comment Share on other sites More sharing options...
Marisawright Posted November 21, 2015 Share Posted November 21, 2015 Just out of interest. Anyone out there confessed or been caught? Actually I do know someone who got caught. He was transferring his super, $500,000 of it. I don't know how much he ended up paying, didn't know him well enough to ask but I believe it was a big chunk. Link to comment Share on other sites More sharing options...
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