How long back in Australia to claim pension?

[dharmaqueen]

Hey, some of you may remember me as Mileswaygirl & Lady Rainicorn - I joined PIO before moving to Perth in 2008 & left after we moved back in 2013. 

My husband is now 56 and retired - he has income from property & small UK pensions, obviously won't get a state pension until he is 67.

We both have GESB pensions in Australia & I believe the preservation age is 55 - I also have another pension fund from the year I worked for BT. 

I understand if we take a lump sum from these pensions it will be taxed by HMRC & wondered if there was any way around this. The amounts involved are not huge so wondering if it was possible to take an extended 'holiday' in Australia - over the 183 days required to be resident for tax purposes & therefore not pay tax in the UK. #

Would we need a fixed address in Australia? We were able to travel very little when we lived there and have probably seen less than most people from the UK who take a holiday in Australia so would love to buy an RV and travel for 6-12 months & that'd be a great way to spend the pension pot!

Or would we need to be in Australia for a period of time before claiming our super to be considered residents?

Just to be clear - I am talking here about our own pension funds in Australia NOT Australian state pension which I have no expectation we would have any rights to.

Would there we any impact on our UK state pension entitlement?

What I am musing over is finishing work in the UK a couple of years before state retirement age & using the Australian pension funds to finance travel for a couple of years before claiming the UK state pension & our UK pension funds. I could put up with 6 months to Australia if I had too (only joking would love an opportunity to see the Kimberley's, Ningaloo, Broome, Uluru, rain forests in Queensland, Great Ocean Road etc.)

If that's not going to be possible then for my husband it is worth us starting to look for a good time to bring his pension pot across to the UK - in terms of exchange rates & his UK income. I'm a higher tax rate payer so would not consider touching mine until I am retired.

I know there used to be some experts on here who had lived in both countries and considered the pension impact so hoping I can pick your brains after a long absence!

[NicF]

9 hours ago, dharmaqueen said:

We both have GESB pensions in Australia & I believe the preservation age is 55 - I also have another pension fund from the year I worked for BT. 

This is incorrect. Preservation age is based on the year you were born and is as the table below.

[Marisawright]

9 hours ago, dharmaqueen said:

I understand if we take a lump sum from these pensions it will be taxed by HMRC & wondered if there was any way around this.

I'm pretty sure that if you want to avoid being taxed by HMRC, you'd have to sell up your home in the UK, otherwise they'd still regard you as "ordinarily domiciled" in the UK and liable for tax.

Preservation age may be 55 but do check carefully.  There used to be a rule that yes, you could withdraw your super at that point, but it's taxable in Australia.  If you want to avoid that tax, you need to leave it for another 5 years or so.

Unless your husband is desperate for the money, the workaround is simple - don't take a lump sum.  Convert the superannuation to a pension ("income stream")  and set the monthly payment at the minimum allowed. 

You will still have to declare it to the Inland Revenue as income, but you'll be receiving it in your retirement when your income is lower, and as it will be only a small extra amount each year, it won't push you into a higher tax bracket (which the lump sum does, which is why you lose so much of it in tax).

It will have no impact on your UK state pension entitlement.

[Ken]

8 hours ago, Marisawright said:

I'm pretty sure that if you want to avoid being taxed by HMRC, you'd have to sell up your home in the UK, otherwise they'd still regard you as "ordinarily domiciled" in the UK and liable for tax.

Preservation age may be 55 but do check carefully.  There used to be a rule that yes, you could withdraw your super at that point, but it's taxable in Australia.  If you want to avoid that tax, you need to leave it for another 5 years or so.

Unless your husband is desperate for the money, the workaround is simple - don't take a lump sum.  Convert the superannuation to a pension ("income stream")  and set the monthly payment at the minimum allowed. 

You will still have to declare it to the Inland Revenue as income, but you'll be receiving it in your retirement when your income is lower, and as it will be only a small extra amount each year, it won't push you into a higher tax bracket (which the lump sum does, which is why you lose so much of it in tax).

It will have no impact on your UK state pension entitlement.

You can rent out your home and still no longer be considered as having a home in the UK (since the accommodation isn't available to you) but (whether you rent or sell) if you remain outside of the UK for less than 3 full tax years (other than short visits) there's a risk HMRC will deem you as resident throughout your absence. It depends on exactly how many ties you have to the UK (of which available accommodation is one) and exactly how long you've been in and out of the UK.

[dharmaqueen]

On 09/05/2021 at 23:55, NicF said:

This is incorrect. Preservation age is based on the year you were born and is as the table below.

I still haven't pulled put the documentation but found this info online so I'm going to assume for now it is 60 - we definitely wouldn't spend time in Australia in the next 4 years anyway so it doesn't make any real difference - unless the exchange rate suddenly soars in GBP favour & we want to bring the money here :)

[dharmaqueen]

On 10/05/2021 at 00:01, Marisawright said:

I'm pretty sure that if you want to avoid being taxed by HMRC, you'd have to sell up your home in the UK, otherwise they'd still regard you as "ordinarily domiciled" in the UK and liable for tax.

Preservation age may be 55 but do check carefully.  There used to be a rule that yes, you could withdraw your super at that point, but it's taxable in Australia.  If you want to avoid that tax, you need to leave it for another 5 years or so.

Unless your husband is desperate for the money, the workaround is simple - don't take a lump sum.  Convert the superannuation to a pension ("income stream")  and set the monthly payment at the minimum allowed. 

You will still have to declare it to the Inland Revenue as income, but you'll be receiving it in your retirement when your income is lower, and as it will be only a small extra amount each year, it won't push you into a higher tax bracket (which the lump sum does, which is why you lose so much of it in tax).

It will have no impact on your UK state pension entitlement.

I think I'm wrong and it probably is 60 but in any case if we were to spend time in Australia it would be after my OH is 60. 

The reason for taking a lump sum is to enable me to retire a year or two earlier & live on it until I qualify for a state pension - it's not a case of being desperate for it, more a lifestyle choice. I genuinely like the idea of doing an extended trip to Australia and if our pension fund in Australia can pay for that fantastic!

Actually the amount we are talking about wouldn't put my husband in the higher tax bracket anyway so perhaps it's not as bad as I thought - he's got about $30k, growing of course 

[dharmaqueen]

On 10/05/2021 at 08:50, Ken said:

You can rent out your home and still no longer be considered as having a home in the UK (since the accommodation isn't available to you) but (whether you rent or sell) if you remain outside of the UK for less than 3 full tax years (other than short visits) there's a risk HMRC will deem you as resident throughout your absence. It depends on exactly how many ties you have to the UK (of which available accommodation is one) and exactly how long you've been in and out of the UK.

Since I'm speculating on something maybe 5 years off not thought everything through but we will be moving from our current home as part of retirement planning so could potentially sell up, travel & then buy our next place when returning to the UK.

We do have a 'buy to let' that we had all the time we were in Australia & lived in briefly on our return before renting out again & definitely paid our taxes in Australia not the UK. It does sound if we were only out for the minimum time it could be questionable though. Would travelling rather than a fixed abode make it more likely we would not be viewed as resident in Australia?

[Marisawright]

4 hours ago, dharmaqueen said:

I still haven't pulled put the documentation but found this info online so I'm going to assume for now it is 60 - we definitely wouldn't spend time in Australia in the next 4 years anyway so it doesn't make any real difference - unless the exchange rate suddenly soars in GBP favour & we want to bring the money here

Remember no matter how good the exchange rate is, the British taxman will grab a big chunk of it. Perhaps work out what the tax impact would be first, before deciding.

Edited May 15, 2021 by Marisawright