email2468 Posted July 4, 2021 Share Posted July 4, 2021 Hello Guys, About to claim NHS pension with tax free lump sum. Just a couple of queries that I'm sure some of you have worked out. I know I'll be taxed on it here as taxable income. I plan on using my bring forward my unused concessional contributions for super of $40000 to reduce the taxable income. I'm presuming that my NHS pension would be taken just as foreign income and therefore this would reduce my taxable income. Secondly will HMRC tax me as I've no tax code for UK? Can I offset this against any ATO tax? How does one do this? Is it better to be taxed in UK and claim an offset here? Its not that much of a pension $15000 pa plus lump sum of $30000. Thanks Quote Link to comment Share on other sites More sharing options...
rammygirl Posted July 4, 2021 Share Posted July 4, 2021 The whole of the lump sum will not be taxed. Just the amount it has grown since you became resident in Australia. Yes offsetting into super is a good idea if you don’t need the cash until you retire but may depend on your tax liability now. I would have an accountant do the return and run the numbers re super. 1 Quote Link to comment Share on other sites More sharing options...
Marisawright Posted July 5, 2021 Share Posted July 5, 2021 19 hours ago, email2468 said: Is it better to be taxed in UK and claim an offset here? It's not a question of which is better - you don't get to choose where you are taxed! HMRC and the ATO make the decisions. I would strongly recommend you consult someone like @Andrew from Vista Financial. We've seen people here transfer pensions and find they lose a third or even a half of it in tax, because they did it at the wrong time or at the wrong age, or chose the wrong options. It's a minefield. 1 Quote Link to comment Share on other sites More sharing options...
Andrew from Vista Financial Posted July 5, 2021 Share Posted July 5, 2021 Hello Purely from the point of view of answering you questions factually. The lump sum as rammygirl points out should not be assessed as income but rather a lump sum from a foreign super fund, see here: Lump sums from a foreign super fund | Australian Taxation Office (ato.gov.au) this broadly is generally based on the growth since a person arrives in OZ to the point of receipt of the lump sum and converted to OZ dollars at that time. Re the pension income, as Marisa points out isn't really a choice and typically Australia will have taxing rights on UK pension income for OZ residents. You have mentioned reducing taxable income by using the concessional contribution catch up rules: Concessional contributions cap | Australian Taxation Office (ato.gov.au) this certainly can be a good way for someone to reduce taxable income in certain circumstances, note also that concessional contributions do attract a 15% tax which is deducted from within the Super Fund. Regards Andy 1 Quote Link to comment Share on other sites More sharing options...
email2468 Posted July 5, 2021 Author Share Posted July 5, 2021 Thanks for the replies. Not that straight forward then. The NHS is a defined benefit scheme and as such its not like a defined contribution scheme - didn't think one can get a growth factor since I emigrated. As I'm only working part time now my income has dropped by two-thirds this year. With the lump sum and pension my total income will be the same as last year. I had assumed my tax would have been similar but I could have reduced it by increasing my concessional contributions to my super. Quote Link to comment Share on other sites More sharing options...
Andrew from Vista Financial Posted July 5, 2021 Share Posted July 5, 2021 (edited) 3 minutes ago, email2468 said: Thanks for the replies. Not that straight forward then. The NHS is a defined benefit scheme and as such its not like a defined contribution scheme - didn't think one can get a growth factor since I emigrated. As I'm only working part time now my income has dropped by two-thirds this year. With the lump sum and pension my total income will be the same as last year. I had assumed my tax would have been similar but I could have reduced it by increasing my concessional contributions to my super. You are correct it is a defined benefit scheme, if you have a statement around the time you arrived in Australia that should give you the value of the lump sum. Edited July 5, 2021 by Andrew from Vista Financial Quote Link to comment Share on other sites More sharing options...
email2468 Posted July 5, 2021 Author Share Posted July 5, 2021 Thanks for that Andrew. I spoke to the NHS pension division and was told that total benefits statements are only available for the previous year. They cant provide a worth value for when I left the UK. Given that I'm "happy" to take the figure as $30000 lump sum and $15000 pension. Combined with my part time work looking at $70000 total income for this year reduced my concessional carry forward contributions. Is there a special tax on foreign lump sums or is it taken as part of total accesable income and taxed at your normal rate? Quote Link to comment Share on other sites More sharing options...
Marisawright Posted July 5, 2021 Share Posted July 5, 2021 1 hour ago, email2468 said: Thanks for that Andrew. I spoke to the NHS pension division and was told that total benefits statements are only available for the previous year. They cant provide a worth value for when I left the UK. Given that I'm "happy" to take the figure as $30000 lump sum and $15000 pension. Combined with my part time work looking at $70000 total income for this year reduced my concessional carry forward contributions. Is there a special tax on foreign lump sums or is it taken as part of total accesable income and taxed at your normal rate? Do bear in mind that Andrew makes a living from offering advice. To be fair, if you want him to go into detail, you should be prepared to pay for a consultation. Compared to the amount you stand to lose if you get it wrong, it would be a small price to pay. 1 Quote Link to comment Share on other sites More sharing options...
email2468 Posted July 5, 2021 Author Share Posted July 5, 2021 Sorry I wasn't meaning to take something for nothing. Big step dropping work hours for semi-retirement. 1 Quote Link to comment Share on other sites More sharing options...
Marisawright Posted July 5, 2021 Share Posted July 5, 2021 1 hour ago, email2468 said: Big step dropping work hours for semi-retirement. Yes indeed. I assume you're looking into a Transition to Retirement scheme with your super? My work stopped fairly abruptly due to a contract ending, so my "reduced work hours up to retirement" never transpired! It is definitely a big step though. I didn't anticipate how hard it would be to suddenly see my savings going out the door and nothing coming in to replace them. It takes quite an adjustment. Quote Link to comment Share on other sites More sharing options...
DrDougster Posted July 5, 2021 Share Posted July 5, 2021 11 hours ago, Andrew from Vista Financial said: You are correct it is a defined benefit scheme, if you have a statement around the time you arrived in Australia that should give you the value of the lump sum. Ahhh, this is an excellent nugget. I'd not have thought of getting a statement from them - many thanks. 1 Quote Link to comment Share on other sites More sharing options...
Andrew from Vista Financial Posted July 5, 2021 Share Posted July 5, 2021 (edited) 19 hours ago, email2468 said: Thanks for that Andrew. I spoke to the NHS pension division and was told that total benefits statements are only available for the previous year. They cant provide a worth value for when I left the UK. Given that I'm "happy" to take the figure as $30000 lump sum and $15000 pension. Combined with my part time work looking at $70000 total income for this year reduced my concessional carry forward contributions. Is there a special tax on foreign lump sums or is it taken as part of total accesable income and taxed at your normal rate? It's fine, happy to answer questions generally, time permitting. You are right the NHS do not provide a historic transfer value however you are not looking for a historic transfer value, you are simply trying to understand what your benefits were worth ie annual pension/lump sum, when you arrived. If your time of arrival was close to when you left the NHS they do provide benefits figures for date of leaving, alternatively you may have a statement of some form showing what your annual pension was close to when you arrived (typically with the NHS the lump sum is 3x annual pension): https://www.nhsbsa.nhs.uk/sites/default/files/2018-10/Retirement Guide %28V24%29 print version - 05.2018 .pdf Failing all of that then a calculation would need to be carried out by essentially working back (or forward if you have benefits from date of leaving and this is not close to you arriving in OZ) by using the method of revaluation that applies (this would be mainly CPI/RPI (perhaps an element at a fixed rate if there is any GMP involved). If need be the ATO will give a private ruling on it, if you provide them with all of the revelant information: Applying for a private ruling | Australian Taxation Office (ato.gov.au) Regards the assessment of the growth of the lump sum, there is no special rate of tax it is simply added to marginal tax rate in the year of receipt. Hope this helps. Andy. Edited July 5, 2021 by Andrew from Vista Financial 1 Quote Link to comment Share on other sites More sharing options...
DrDougster Posted July 9, 2021 Share Posted July 9, 2021 On 06/07/2021 at 07:18, Andrew from Vista Financial said: It's fine, happy to answer questions generally, time permitting. You are right the NHS do not provide a historic transfer value however you are not looking for a historic transfer value, you are simply trying to understand what your benefits were worth ie annual pension/lump sum, when you arrived. If your time of arrival was close to when you left the NHS they do provide benefits figures for date of leaving, alternatively you may have a statement of some form showing what your annual pension was close to when you arrived (typically with the NHS the lump sum is 3x annual pension): https://www.nhsbsa.nhs.uk/sites/default/files/2018-10/Retirement Guide %28V24%29 print version - 05.2018 .pdf Failing all of that then a calculation would need to be carried out by essentially working back (or forward if you have benefits from date of leaving and this is not close to you arriving in OZ) by using the method of revaluation that applies (this would be mainly CPI/RPI (perhaps an element at a fixed rate if there is any GMP involved). If need be the ATO will give a private ruling on it, if you provide them with all of the revelant information: Applying for a private ruling | Australian Taxation Office (ato.gov.au) Regards the assessment of the growth of the lump sum, there is no special rate of tax it is simply added to marginal tax rate in the year of receipt. Hope this helps. Andy. Andy, I seriously owe you a beer. I just managed to get verified on digidentity, log on to myGov and get my NHS pension statement in a .pdf download. All this in-between a cancelled patient and a coffee in my clinic that everyone is scared of coming to today! Cheers Dude! 1 Quote Link to comment Share on other sites More sharing options...
Andrew from Vista Financial Posted July 9, 2021 Share Posted July 9, 2021 (edited) 8 hours ago, DrDougster said: Andy, I seriously owe you a beer. I just managed to get verified on digidentity, log on to myGov and get my NHS pension statement in a .pdf download. All this in-between a cancelled patient and a coffee in my clinic that everyone is scared of coming to today! Cheers Dude! Happy for you to buy me a pint next time you are in Adelaide!! Seriously though, glad you found my comments useful Edited July 9, 2021 by Andrew from Vista Financial 1 Quote Link to comment Share on other sites More sharing options...
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