Superannuation, moving back to UK

[PaulFC]

Hi

I am 55 years of age, and my wife and I are looking to move permanently back to the UK at some stage over the next few years.  My preservation age is 60. I am hoping one of the Finance guys on this forum can assist me.  I am sure I would not be alone in wanting to know the answer to my questions but despite having read many posts on Pomsinoz for the last few years, I am still a bit unsure of how my super would be affected depending on when I move back to the UK

Question 1: I understand that if we stay in Oz until my 60th birthday and formally retire from my job, I can access my super in full with no tax implications in Aus.  If I do this and then move back to the UK, do you know if my super money (big lump sum) is then liable to taxation in the uk after I settle back there or is it considered to be part of my personal wealth that I believe I am allowed to take back into UK as a 1 off tax exempt transfer when I move back (along with money from the sale of my house and other savings)?

Question 2: If we decided to move back to UK before my 60th birthday and got a job in the UK. Once I turn 60 I am presuming I can still access my super, in the same way as if I was still living and working in Aus ie I would need to retire from my job (new uk one).  If this is correct, can I still 'cash' in the full value of my super?, if so, as I am now resident overseas, are there ATO tax implications on cashing my super in addition to those in UK? I believe I would lose approx 1/3 of the total value of the sum transferred to UK tax dept. (depending on my marginal rate of tax in UK for the financial year I transferred the lump sum).  If I chose not to 'cash' in the full amount and instead took a small ongoing annual income which would be transferred over to a UK  bank account on a fortnightly/monthly basis, would this income be treated in the same way as any other UK based earnings and taxed accordingly at the appropriate marginal rate of tax?   

Thanks for any help you can offer.

 

  

[Ken]

On 27/01/2021 at 17:51, PaulFC said:

Hi

I am 55 years of age, and my wife and I are looking to move permanently back to the UK at some stage over the next few years.  My preservation age is 60. I am hoping one of the Finance guys on this forum can assist me.  I am sure I would not be alone in wanting to know the answer to my questions but despite having read many posts on Pomsinoz for the last few years, I am still a bit unsure of how my super would be affected depending on when I move back to the UK

Question 1: I understand that if we stay in Oz until my 60th birthday and formally retire from my job, I can access my super in full with no tax implications in Aus.  If I do this and then move back to the UK, do you know if my super money (big lump sum) is then liable to taxation in the uk after I settle back there or is it considered to be part of my personal wealth that I believe I am allowed to take back into UK as a 1 off tax exempt transfer when I move back (along with money from the sale of my house and other savings)?

Question 2: If we decided to move back to UK before my 60th birthday and got a job in the UK. Once I turn 60 I am presuming I can still access my super, in the same way as if I was still living and working in Aus ie I would need to retire from my job (new uk one).  If this is correct, can I still 'cash' in the full value of my super?, if so, as I am now resident overseas, are there ATO tax implications on cashing my super in addition to those in UK? I believe I would lose approx 1/3 of the total value of the sum transferred to UK tax dept. (depending on my marginal rate of tax in UK for the financial year I transferred the lump sum).  If I chose not to 'cash' in the full amount and instead took a small ongoing annual income which would be transferred over to a UK  bank account on a fortnightly/monthly basis, would this income be treated in the same way as any other UK based earnings and taxed accordingly at the appropriate marginal rate of tax?   

Thanks for any help you can offer.

 

  

Question 1: If you take your Super as a lump sum while still resident in Australia then it will not be taxable income in the UK (the foreign income of a non-resident is not taxed in the UK). There is no tax of the transfer of money that you had before you became a resident regardless of the source of that money (super, employment, property sale or anything else).

Question 2: There are no ATO tax implications on cashing in your Super (provided you are a citizen or permanent resident - for temporary residents punitive tax rates apply). The Double Taxation Agreement assigns pension income to be taxed in the country of residence - so if you are living in the UK it will be taxed by HMRC not the ATO. This applies whether you receive it in a UK bank account or an Australian bank account, and yes this does mean it would taxed in the same way as any other UK based earnings (except of course that there would be no PAYE deducted) and taxed accordingly at the appropriate marginal rate of tax.

[Marisawright]

To summarise Ken’s post in very simple terms: if you take the lump sum while still resident in Australia and it’s been deposited in your bank account, it’s just cash and there’s no UK tax liability.

If you wait until you’ve left Australia and then claim the lump sum, the Inland Revenue will grab about 30% of it. 

If you turn it into a small pension then it is tax free in Australia but taxed as income in the UK

Edited January 31, 2021 by Marisawright

[dharmaqueen]

Hi, this thread kind of answers the question I have just posted but if I was to become resident in Australia again, could I cash in my Super tax free?

Is there a time frame on how long I would need to be a resident, before & after I cashed it in?

Would I need a permanent address in Australia or would travelling in a motorhome still be considered resident?

I do have citizenship but returned to the UK in 2013 after 5 years in Australia.

Many thanks

[PaulFC]

Hi dharmaqueen

I'm no expert in these matters, but as far as I am aware if you are an Australian Citizen you can return at any time, where and how you live (house, motorhome,, boat etc) would make no difference, lots of people just have a post office box and go on the road.  I would guess that the issues/conditions will be, whether your Australian passport is still in date and valid for you to enter back into Aus on it (I assume it is) and how long you need to be in Aus before you are deemed to have returned for Aus taxation purposes.  But this may have implications then on anything you earn etc back in UK especially if you are only returning temporarily.  I believe I saw something that you need to be living back in Aus for a minimum of 6 months before you automatically become one.  https://www.ato.gov.au/Individuals/coming-to-australia-or-going-overseas/Your-tax-residency/ may help.

 

Good luck

[Marisawright]

35 minutes ago, PaulFC said:

I'm no expert in these matters, but as far as I am aware if you are an Australian Citizen you can return at any time, where and how you live (house, motorhome,, boat etc) would make no difference, lots of people just have a post office box and go on the road. 

However, it's not Australian tax that's the problem.  It's British tax.

Provided they're past the age threshold, their superannuation payout will not be taxed by the Australian taxman, no matter where they're living at the time.  It's always tax-free.

It's the British tax they have to worry about.  If they are legally resident in the UK when they withdraw their super, the British taxman will take a huge chunk of it. 

So the question would be, what would they have to do, to convince HMRC that their home is not in the UK?  I'm not convinced it's as simple as staying out of the country for more than six months.  As I said on the other thread, I think if you've kept your house in the UK, that wouldn't be enough.  The HMRC would just say, "you're on a long holiday but it's obvious you really live here". 

I think if it really was as simple as that, we'd have had other members doing it in the past.

 

Edited May 10, 2021 by Marisawright

[PaulFC]

Now you have me thinking.  As I was included in this chain because of my original post, can I ask you some more info that would be relevant to me:

If I move back to the UK before my preservation age (60) and become a UK tax resident again, ignoring the 'taking the entire amount as a lump sum' option for the time being and I chose to re-invest the entire amount into my superannuation fund's income stream option (Qsuper) within Australia (which I have check I can do from overseas),  this would give me an income per year paid into an Aus bank account which I could either leave there or draw on from the UK. In this scenario my understanding is that I would have to declare my annual income received from my superannuation income (converted into UK pounds) each tax year.  However since reading the above its got my brain ticking and I want to check whether the UK tax authorities will also want to tax the full amount in my super pot prior to me investing it into an Income Stream Account or will they just be interested in the annual income derived from it each tax year.  I ask because I guess in order for me to re-invest it I have to cash my super in and transfer the funds (all be it internally with in QSuper) from one type of investment to another.  Could it be deemed by UK Tax Office that I have realised the profit from my super and whether I cash it in and take the money as 1 lump sum or reinvest it, the tax implications are the same - I have taken the profit from my investments and therefore it is taxable at that point.  If this is the case will the UK Tax Office then tax me again each year I take an income from  a sum of money I've already paid tax on as it will (hopefully) be realising some level of growth from investment in the future?  I hope that made sense....    

[Marisawright]

58 minutes ago, PaulFC said:

I want to check whether the UK tax authorities will also want to tax the full amount in my super pot prior to me investing it into an Income Stream Account ....  I ask because I guess in order for me to re-invest it I have to cash my super in and transfer the funds (all be it internally with in QSuper) from one type of investment to another.  Could it be deemed by UK Tax Office that I have realised the profit from my super 

Wow, that is an excellent question and one that never occurred to me.  As you say, with most super funds you would simply transition your balance from the accumulation phase (superannuation) to the retirement phase (pension), within the same company.  I had never thought of it as "cashing in" the super, but I don't know.  

If it does count as cashing in, there's still a workaround.  You could simply leave your money in the superannuation fund and just withdraw small amounts as it suits.  

[Ken]

4 hours ago, PaulFC said:

Now you have me thinking.  As I was included in this chain because of my original post, can I ask you some more info that would be relevant to me:

If I move back to the UK before my preservation age (60) and become a UK tax resident again, ignoring the 'taking the entire amount as a lump sum' option for the time being and I chose to re-invest the entire amount into my superannuation fund's income stream option (Qsuper) within Australia (which I have check I can do from overseas),  this would give me an income per year paid into an Aus bank account which I could either leave there or draw on from the UK. In this scenario my understanding is that I would have to declare my annual income received from my superannuation income (converted into UK pounds) each tax year.  However since reading the above its got my brain ticking and I want to check whether the UK tax authorities will also want to tax the full amount in my super pot prior to me investing it into an Income Stream Account or will they just be interested in the annual income derived from it each tax year.  I ask because I guess in order for me to re-invest it I have to cash my super in and transfer the funds (all be it internally with in QSuper) from one type of investment to another.  Could it be deemed by UK Tax Office that I have realised the profit from my super and whether I cash it in and take the money as 1 lump sum or reinvest it, the tax implications are the same - I have taken the profit from my investments and therefore it is taxable at that point.  If this is the case will the UK Tax Office then tax me again each year I take an income from  a sum of money I've already paid tax on as it will (hopefully) be realising some level of growth from investment in the future?  I hope that made sense....    

The UK doesn't treat the transfer of money from a UK pension fund to an annuity or to a draw-down account as income. Only the income from the annuity or draw-down is taxable. It would be logical if they treat an Australian Super Fund in the same way and I expect that they do so (I've never heard otherwise although I've not known anyone in the position to do this) but beware that logic and tax do not always go hand in hand!

[PaulFC]

Thanks Ken, that's good information (noting the difference between logic and tax rules).  Appreciate your time and help