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QROPS pension - 5 year rule question re. tax


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My husband and I (both dual Australian/British Citizens) lived and worked in the UK for 14 years. We moved back to Oz in 2013 and transferred my husband's pension into a QROPS scheme in Oz (this scheme is no longer on the approved QROPS scheme).


We would like to access some of the money (husband is 64 this year) and the Australian Super fund advisor has said this is no problem as my husband is over 60.


We assume they have to notify HMRC as part of the five year rule conditions. Does anyone know what the tax rate would be on withdrawals in these circumstances? We don't want to end up with a 55% tax bill as some sites suggest might happen.


Many thanks


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Hello Mimi


In relation to accessing monies at age 64 from Australian Superannuation Funds, yes this is possible and from an Australian legislation perspective he will be either able to access up to 10% per annum via a non commutable account based pension or 100% if he has met a full condition of release.


It is the responsibility of the QROPS (former QROPS) scheme manager to report to HMRC the payment.


Regards the HMRC 55% tax bill, this is in relation to an unauthorised payment charge, unauthorised payment charges occur typically when a person takes benefits or accesses their monies from a QROPS outside of what the UK would allow had that money been in a UK pension.


Since the UK from 6 April 15 allows 100% access to accumulation pension funds and this rule is also allowed in Australia withdrawing money from super for a person over age 55 would not be unauthorised.


However withdrawals of this money may create a HMRC income tax charge, have a look at this thread: http://www.pomsinoz.com/forum/money-finance/225938-qrops-can-i-cash-some-all-fund.html particularly this comment:


"On the taxation of the money if it is withdrawn. A withdrawal after the age of 60 will be free of Australian tax. The question arises whether any withdrawal of UK sourced money is chargeable to UK tax. Certainly, where the member has been continuously non-UK resident for five clear UK tax years then withdrawals are no longer covered by the UK rules.


Until that time, there is a difference between pension withdrawals and lump sum withdrawals. Pension withdrawals would not be subject to UK tax anyway under Article 17 of the Double Taxation Agreement. Lump sum withdrawals made since 6 April 2015 however, may be caught by the new UK 25%/75% tax free/taxable regime.

[TABLE=class: cms_table]



[TD]This seems to be the result of adding sections 636A(1A) and (1B) of the Income Tax (Earnings and Pensions) Act 2003 (which contains the 25% tax free - 75% taxable provisions) to the "member payment provisions" in Schedule 34 of the Finance Act 2004."[/TD]






Also withdrawing a lump sum of money is possible for a person who has met a full condition of release however if they have not and wish to access up to 10% (as mentioned above) or wish to start an income stream then an Account Based Pension will be required either commutable or non-commutable.


This would need to be explored carefully as this could be seen as a move to a non QROPS which could then be classed as an unauthorised payment and a potential 55% tax charge could arise.


This would depend on the individual superannuation scheme, if the scheme you are in applied for QROPS status for their super and pension product then this should be ok however if the QROPS status only applied to the superannuation fund and not the pension fund this could be an issue (you should check with your specific scheme).



Hope this helps.





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