Super question

[Catzog]

Hi all

 

It’s long way off until I retire but I’m curious about how Super works if I return to the UK and retire there.

If you have retired and are withdrawing your super in the standard way, i.e. weekly, bi-weekly etc, do you get taxed heavily on doing this because you are not in Australia anymore? This information is difficult to find, I have even contacted my super company and they do not know this! So if anyone on this site has retired in UK and is withdrawing Super, please can you be so kind to let me know the tax/issues around this.

 

I understand the issues surrounding withdrawing as a lump sum, all I want to know is the tax situation on withdrawing your super in UK the standard way (as you would a pension).

 

Hope that makes sense!

 

Thanks so much.

[NickyNook]

Super withdrawn as a pension is not taxable by the ATO - regardless of where you live.

 

UK tax office will treat it as income, though, so you may have to pay tax on it in the UK. You do get the tax-free allowance there so depending on how much it is and whether you have any other income will determine whether UK tax is due.

[Keith and Linda]

I found this on the ATO, https://www.ato.gov.au/business/international-tax-for-business/in-detail/australian-income-of-foreign-residents/tax-on-australian-income-for-foreign-residents/ basically you have to declare it and any other Australian income you receive if you are no longer resident in Aus, but I am not sure at present if/or how they will tax it but you do have to declare it. I do know that as a non resident then you pay tax on all Aus income with no tax free allowances to off set against.

This is of current interest to me so will be doing more research soon, so far I think you will be classed as non-resident if you spend more than 6months and 1 day out of the country in any one tax year. I believe for those having no intention of coming back to Aus then the lump sum withdrawal appears to be a prudent option, but take professional financial advice to be sure of all your liabilities.

[Keith and Linda]

Just re-reading the tax page again it does say you will pay tax on ALL your Aus sourced income and that you need to inform the financial institutions of your status so they can deduct the correct amount of withholding tax.

[Catzog]

Thanks so much for your reply. So if I read this correctly it means that if I move back to England one day (as a duel citizen) once I retire and withdraw my super I will have to submit an Australian tax return annually for this. Sorry I am not the sharpest of tools when it comes to Super/finance etc!!!

[Catzog]

Super withdrawn as a pension is not taxable by the ATO - regardless of where you live.

 

UK tax office will treat it as income, though, so you may have to pay tax on it in the UK. You do get the tax-free allowance there so depending on how much it is and whether you have any other income will determine whether UK tax is due.

 

Thanks for much for your reply. Where did you find this information about super not being taxable by ATO? It would be really handy for me to have? Thanks

[Keith and Linda]

Thanks so much for your reply. So if I read this correctly it means that if I move back to England one day (as a duel citizen) once I retire and withdraw my super I will have to submit an Australian tax return annually for this. Sorry I am not the sharpest of tools when it comes to Super/finance etc!!!

 

You have to provide your status details to your pension provider, IE that you are not a resident of Australia, also of where you are resident (there maybe a reciprocal agreement in place though not with UK at present) and then the provider will deduct, if any, tax liability. According to the page I linked previously you have to declare the pension and whilst not sure if it is taxed I have a strong suspicion that it will be if you are a non resident. Citizenship does not come into it really as it is about where you are resident for tax purposes.

I will be in the same boat as you except the plan is to spend time 50/50ish in both countries so I need to bottom this one out but no point in doing it too soon as the rules could change.

[Marisawright]

Thanks for much for your reply. Where did you find this information about super not being taxable by ATO? It would be really handy for me to have? Thanks

 

I've been told the same thing by a tax adviser, I don't have any documentation though. It is not taxed by the ATO but you will have to declare it as income on your UK tax return and it will be taxed like normal income.

[winter1]

Hi,

 

My understanding as per The UK / Australia double tax treaty states at Article 17 (Pensions and annuities) that the determining factor of where a pension payable by one of the countries is taxed is the residence of the recipient. The HMRC rule on taxation is that 90% of the overseas pension received is taxable so for ever £100 you pay tax on £90, not a great concession when you have already paid tax going in. I have included several links which you can read the HMRC fourth paragraph refers. may take some further reading. Other links should be of interest.

hope this helps.

 

https://www.gov.uk/hmrc-internal-manuals/employment-income-manual/eim74500

http://www.gerardassociates.co.uk/how-pension-taxed-overseas-double-taxation/

http://www.ftadviser.com/2015/07/21/pensions/personal-pensions/hmrc-rules-out-australian-pension-tax-exemption-dpZ5Fk3zBb4

[DT55]

A slight variation on this.....

 

If you're old enough to cash in your super in Australia as a lump sum and then subsequently retire to the UK, would you still pay tax on the lump sum in the UK? Would this be an asset or income?

 

All very confusing......head beginning to hurt

[Ken]

A slight variation on this.....

 

If you're old enough to cash in your super in Australia as a lump sum and then subsequently retire to the UK, would you still pay tax on the lump sum in the UK? Would this be an asset or income?

 

All very confusing......head beginning to hurt

 

If you took the lump sum before becoming resident in the UK for tax purposes then it would be outside the scope of UK taxation even if you subsequently transferred the money to the UK.

[Marisawright]

A slight variation on this.....

 

If you're old enough to cash in your super in Australia as a lump sum and then subsequently retire to the UK, would you still pay tax on the lump sum in the UK? Would this be an asset or income?

 

 

If you're still living in Australia and take your lump sum and pay it into an Australian bank, then it's tax free. The super fund and the Australian tax man don't consider what you're going to do in the future! I guess if you took the lump sum one day and left the country the next, they might look it at - but get it all done a few weeks before, and it's no problem.

 

Once the money is in the bank, it's just "savings", and you can do anything you like with it. The British government won't tax you for transferring your savings.

[winter1]

A slight variation on this.....

 

If you're old enough to cash in your super in Australia as a lump sum and then subsequently retire to the UK, would you still pay tax on the lump sum in the UK? Would this be an asset or income?

 

All very confusing......head beginning to hurt

 

 

 

In most cases NO, it is treated as capital once it has been removed from Super in Australia but it has to be done before you return to the UK and transferred when you move all your other assets over.

If you wanted security of an income from this then you could set some of the sum aside to buy a "PURCHASED life annuity" when you get back to the UK. This is where only any capital gains or interest earnings are taxed but draw down of capital is tax free. for example you draw a monthly sum of £200, £180 might be deemed to be capital and £20 earnings therefore Tax is only taken on the £20. Annuity rates for these are generally higher than those of ones purchased from pension funds directly, and unlike pension annuities any remaining pot is passed on to your heirs.

 

 

There may be differences if you have been away from the UK only a short time and have returned just to do this but I would also like to know the answer to this and the time limits involved.

[Marisawright]

There may be differences if you have been away from the UK only a short time and have returned just to do this ...

 

I'm not sure what you mean by this statement, but the thing with tax is that residency is something that has to be established by actually being resident in the country. So for instance, you couldn't move to the UK, then return to Australia briefly to withdraw your super - because Australia would regard you as a visitor and tax you accordingly. And vice versa.

[Alan Collett]

I'm not sure what you mean by this statement, but the thing with tax is that residency is something that has to be established by actually being resident in the country. So for instance, you couldn't move to the UK, then return to Australia briefly to withdraw your super - because Australia would regard you as a visitor and tax you accordingly. And vice versa.

 

 

Reference the bold type: not necessarily.

 

It may be possible to resume tax residency in Australia sooner if you have a domicile in Australia.

 

See Tax Ruling IT2650 at http://www.ato.gov.au

 

Best regards.

[Alan Collett]

I found this on the ATO, https://www.ato.gov.au/business/international-tax-for-business/in-detail/australian-income-of-foreign-residents/tax-on-australian-income-for-foreign-residents/ basically you have to declare it and any other Australian income you receive if you are no longer resident in Aus, but I am not sure at present if/or how they will tax it but you do have to declare it. I do know that as a non resident then you pay tax on all Aus income with no tax free allowances to off set against.

This is of current interest to me so will be doing more research soon, so far I think you will be classed as non-resident if you spend more than 6months and 1 day out of the country in any one tax year. I believe for those having no intention of coming back to Aus then the lump sum withdrawal appears to be a prudent option, but take professional financial advice to be sure of all your liabilities.

 

 

Hi Keith and Linda.

 

Reference the bold type: again, I recommend a look at ATO Tax Ruling IT2650.

 

Best regards,

[winter1]

Hi,

What I meant was suppose you moved back to the UK for a few years without drawing your Super as you were below 60. You then returned to Australia as a tax resident over the age of 60.

You then withdraw a lump sum from your super maybe only a portion or maybe the full balance. Circumstances then force you back to the UK after 2 or three years. would the UK be able to claim an amount of tax on the super lump sum you withdraw whilst in Australia.

Hypothetical at the moment but due to complicated family circumstances not out of the realms of possibility (both my wife and I have elderly parents in need of support one is in Australia one is in the UK). would it be better to just draw the super in the UK and pay the tax on 90%.

[Ken]

Hi,

What I meant was suppose you moved back to the UK for a few years without drawing your Super as you were below 60. You then returned to Australia as a tax resident over the age of 60.

You then withdraw a lump sum from your super maybe only a portion or maybe the full balance. Circumstances then force you back to the UK after 2 or three years. would the UK be able to claim an amount of tax on the super lump sum you withdraw whilst in Australia.

Hypothetical at the moment but due to complicated family circumstances not out of the realms of possibility (both my wife and I have elderly parents in need of support one is in Australia one is in the UK). would it be better to just draw the super in the UK and pay the tax on 90%.

 

In theory if HMRC refused to accept that you had ceased to be UK resident when you went back to Australia then they would claim tax on the lump sum (and any other income). Unfortunately I can't say how likely that is to happen. Of course if you left your house empty and available to move back into and your car in the garage then you'd have to expect that no one would believe you'd really left!

[Marisawright]

Hi,

What I meant was suppose you moved back to the UK for a few years without drawing your Super as you were below 60. You then returned to Australia as a tax resident over the age of 60.

You then withdraw a lump sum from your super maybe only a portion or maybe the full balance. Circumstances then force you back to the UK after 2 or three years. would the UK be able to claim an amount of tax on the super lump sum you withdraw whilst in Australia.

Hypothetical at the moment but due to complicated family circumstances not out of the realms of possibility (both my wife and I have elderly parents in need of support one is in Australia one is in the UK). would it be better to just draw the super in the UK and pay the tax on 90%.

 

I think it would all boil down to what the UK government thinks is your residency status. If, when you moved back to Australia, you sold up your house in the UK and gave every indication of settling in Australia, then I'd say you would be fine. If, on the other hand, you hung on to your UK house, that could be taken to indicate you were only leaving the UK temporarily,, and the UK govt might decide to tax you.

 

Either way, I can't see the point of withdrawing the sum early and paying the tax now - why accept the worst case scenario when it might all work out to be tax-free later?