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TBD

SIPP drawdown and subsequent transfer

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Posted (edited)

I appreciate the need for detailed advice as to pension transfer arrangements.

However, does anyone know if it would be possible to:

(1) take 25% of an UK SIPP tax free in the UK before becoming tax-resident in Australia;

(2) transfer the balance to an Australian QROPS/SMSF without crystallising a tax charge in the UK; and then

(3) make further payments into the fund in Australia (getting whatever tax benefits are available for such payments from time to time in Australia).

I am 55 but anticipate working for 10+ years still.

Edited by TBD

309/100 - lodged 25 May 2019; no RFI; 309 granted 31 January 2020

 

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Posted (edited)

Professional advise would be wise.  

I'd have thought that if you withdraw the money from the UK SIPP while you are still residing in the UK, then it would just become money in your bank account.  

I would say, however, that if you are not actually residing in the UK, then you need to make cast-iron sure of your residency status for both tax and pension purposes, which may not be the same thing.  It is often not as straightforward as you think.   

If you then transfer that money to your Australian bank account, that is just a cash transfer and has nothing to do with the UK taxman.

If you then pay that money into a Superannation fund, it's just cash and nothing to do with the UK taxman.  Note however that you may be limited in how much you can deposit, because you are not transferring from another pension, you are just making a cash contribution, and there are limits to how much you can contribute each year. 

While you are working in Australia, then you will be eligible to pay continuing contributions into your superannuation fund.  

One word of caution - a SMSF is not advisable unless you have a substantial lump sum, because the administrative costs will be too high relative to the balance. For most people, an ordinary superannation fund is the best option - just research them carefully as performance and fees vary greatly.  There is nothing to stop you transferring it to a SMSF later, there are no restrictions. 

 

 

Edited by Marisawright

Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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Marisa - many thanks. My query wasn't so much about the money withdrawn (which I see would become "ordinary" cash) as to whether it would be possible to transfer the balance of the SIPP  from the UK to an Australian fund without tax consequences.

Is there a view as to how what sort of fund becomes viable for a SMSF?


309/100 - lodged 25 May 2019; no RFI; 309 granted 31 January 2020

 

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Posted (edited)
1 hour ago, TBD said:

Marisa - many thanks. My query wasn't so much about the money withdrawn (which I see would become "ordinary" cash) as to whether it would be possible to transfer the balance of the SIPP  from the UK to an Australian fund without tax consequences.

Is there a view as to how what sort of fund becomes viable for a SMSF?

So you are considering two transactions.

  • The first one where you withdraw cash, transfer it to Australia and then put it in a super fund,
  • and the second where you transfer the remaining balance at some later date directly from the SIPP to an Australian QROPS compliant fund

Is that right?

I can't help with the tax consequences of the second transaction, which would occur once you are an Australian resident, I assume. There are some members who are contemplating doing it, so they may be able to help.

When I looked into it for myself, the advice I got was that it wasn't worth starting a SMSF unless you have at least $250,000 in funds.  As I said, there is nothing to stop you joining an ordinary superannuation fund initially,and then starting a SMSF once you are more familiar with the Australian investment market and the pros and cons of superannuation investment. Moving money from a super fund to a SMSF is easy.    However moving from a SMSF to a super fund can be a nightmare!  So I wouldn't contemplate starting one until you're very sure it's the right choice.

Edited by Marisawright

Scot by birth, emigrated 1985 | Aussie husband applied UK spouse visa Jan 2015, granted March 2015, moved to UK May 2015 | Returned to Oz June 2016

"The stranger who comes home does not make himself at home but makes home itself strange." -- Rainer Maria Rilke

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Marisa - yes, it's really the second transaction that I was speculating about (residue of SIPP to some Super fund - I might actually use the 25% for other purposes and not put that into a fund). It will also depend on what the withdrawal of initial funds from the SIPP does to its status (the status of the residue). I am at very early stages at present (still in UK, still undoubtedly UK resident for all purposes, beginning to plan move once the World emerges from Covid-19). Your comments about moving from a Super to SMSF are very helpful as well. Thank you.


309/100 - lodged 25 May 2019; no RFI; 309 granted 31 January 2020

 

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On 08/04/2020 at 23:30, TBD said:

I appreciate the need for detailed advice as to pension transfer arrangements.

However, does anyone know if it would be possible to:

(1) take 25% of an UK SIPP tax free in the UK before becoming tax-resident in Australia;

(2) transfer the balance to an Australian QROPS/SMSF without crystallising a tax charge in the UK; and then

(3) make further payments into the fund in Australia (getting whatever tax benefits are available for such payments from time to time in Australia).

I am 55 but anticipate working for 10+ years still.

Hello

The strategy above would seem to be viable, there may be a slight hurdle transferring the residue after the PCLS (25% lump sum) has been taken and you are living in Oz if the balance is over the allowable Australian contributions caps (in cases like these typically $300,000) and your SIPP providers rules once in drawdown (in terms of allowing partial transfers out).

Regards

Andy 

  • Thanks 1

Financial Adviser (FPA Member AFP ®) Specialising in UK Expat Advice and Pension Transfers / AR-322874 /AFSL-234951

SMSF Accredited Adviser / UK SIPP Authorised Adviser 

Director  - Vista Financial Services – www.vistafs.com.au 08 8381 7177

 

Please note that my advice is general advice only and professional financial advice should be sought for your own personal situation.

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