Super, tax and retiring in europe

[Rosiegirl]

Hi,

We're planning to retire to Europe (possibly Portugal) in around 5 years time.  I have just started to salary sacrifice into my super but it may appear that I might be better off putting this money into savings or paying off mortgage due to possibly having to pay tax again on the super when I retire.  Is this correct - will I be taxed when I draw my super overseas and is it better just to save it in the bank rather than salary sacrificing?  Very confusing.

Thanks

Edited March 31, 2019 by Rosiegirl

[Rossmoyne]

This whole subject is open to so many variables as the goal posts of superannuation etc keep being changed.

Personally I concentrated on paying off my mortgage before I started contributing via salary sacrifice to my superannuation.   I worked on the basis that to be debtless would be better than saving, considering the interest rates for everything.   Personal choice though.

[Marisawright]

When you retire in Australia and take a lump sum, it's tax-free.    If you decide to convert it to a pension, the pension is also tax-free.

If you go to live overseas, Australia still won't tax your lump sum or pension.  However, the country you've moved to, might.  In the UK, for instance, you'd lose a big chunk of your lump sum to the tax man - or if you decided to convert it to a pension, your pension has to be declared as income, same as a salary.  So it's a question of finding out the tax rules of your proposed destination.

My gut feeling is that if you have a mortgage, you'd be better off paying that off than putting it into super at this stage.  

[Rosiegirl]

Thanks for the replies - I'll do some further research into taxation and whatever country we eventually decide to retire to.  I'm leaning towards paying off the mortgage too rather than putting into super.  I may have to see a financial advisor - does anyone know of any based in WA that specialise in people retiring overseas?

Edited April 1, 2019 by Rosiegirl

[Elaine Davis]

We have a similar plan and relocating back to Scotland in 2023 when I turn 60. Fortunately mortgage free and stopped salary sacrificing cos the Aussie government love to tamper with Super. So now saving cash at best sourced Term deposit interest rates with no risk and guaranteed by bank. My understanding is Super can be withdrawn upon official retirement after 60 years of age tax free.

[Marisawright]

1 hour ago, Elaine Davis said:

We have a similar plan and relocating back to Scotland in 2023 when I turn 60.  My understanding is Super can be withdrawn upon official retirement after 60 years of age tax free.

Tax free IF you withdraw it while you are still living in Australia. If you wait till you arrive in the UK, you’ll lose a big chunk to the British taxman

[Elaine Davis]

Tax free IF you withdraw it while you are still living in Australia. If you wait till you arrive in the UK, you’ll lose a big chunk to the British taxman

Thanks Marisa will def be withdrawing beforehand...... thanks for the heads up ! [emoji16]

[Rosiegirl]

Thanks for the replies.  Is it best to withdraw completely and bring the money to the UK or withdraw as an income stream - keeping an Australian bank account open?  I thought that you were more likely to get taxed withdrawing it?  

[Marisawright]

41 minutes ago, Rosiegirl said:

Thanks for the replies.  Is it best to withdraw completely and bring the money to the UK or withdraw as an income stream - keeping an Australian bank account open?  I thought that you were more likely to get taxed withdrawing it?  

It's up to you to decide, depending on your circumstances.  

If you take it as a lump sum BEFORE you leave Australia, once it's sitting in your bank account it's just money.  No one is going to tax it.  However, once you transfer the money to the UK, you'll have to consider how you're going to invest it - and of course, you'll get taxed on the interest/profits like any other income from investments after that. 

If you decide to leave the money in superannuation, then it will just go on earning interest (just make sure you  cancel all insurances, as they're not valid anyway, and are only costing you money). 

If you then decide to convert it to a pension (income stream), the Australian govt won't tax it.  However, you will have to declare it as income on your UK tax return and it will be taxed (though it is classed as a pension and therefore taxed at a lower rate than ordinary salary).   

It really comes down to how much money you have in superannuation and how much you would get if you collected it as an income stream.  You do get a tax-free threshold after all.

 

 

[ramot]

On 05/04/2019 at 21:38, Marisawright said:

It's up to you to decide, depending on your circumstances.  

If you take it as a lump sum BEFORE you leave Australia, once it's sitting in your bank account it's just money.  No one is going to tax it.  However, once you transfer the money to the UK, you'll have to consider how you're going to invest it - and of course, you'll get taxed on the interest/profits like any other income from investments after that. 

If you decide to leave the money in superannuation, then it will just go on earning interest (just make sure you  cancel all insurances, as they're not valid anyway, and are only costing you money). 

If you then decide to convert it to a pension (income stream), the Australian govt won't tax it.  However, you will have to declare it as income on your UK tax return and it will be taxed (though it is classed as a pension and therefore taxed at a lower rate than ordinary salary).   

It really comes down to how much money you have in superannuation and how much you would get if you collected it as an income stream.  You do get a tax-free threshold after all.

 

 

Uk tax free allowance raised to 12,500 Uk pounds.