ATO position on UK SIPPs

[Philip]

We will be moving to Australia at the end of the year.

We have UK SIPPs in which we have been trading shares and ETFs etc. Obviously, nothing needs to be done with regards to HMRC.

However regarding the ATO, all information I can find talks about lump sums and drawdowns - but this is 25 years in the future for us.

As Australian tax residents what is the position on trading within a SIPP? It would seem perverse to have to pay tax on any gains / dividends when the money is not accessible.

 

I also can't find any straightforward answer on the ATO's position on foreign accumulating ETFs - ideally you would just pay CGT on the total gain when sold, but somehow I feel it might not be so simple. Would using income ETFs be better as the amounts of dividends and gains are easily knowable?

[Alan Collett]

Who is the trustee of the SIPP please?

Best regards.

 

[Philip]

They are held with AJ Bell

[Alan Collett]

1 hour ago, Philip said:

They are held with AJ Bell

Who are the trustees please?

Best regards.

[Philip]

I have no idea... but looking through my documents it appears to be "Sippdeal Trustees"

Edited August 21, 2023 by Philip

[Alan Collett]

Just now, Philip said:

I have no idea... but looking through my documents it appears to be "Sippdeal Trustees"

Thanks.

Likely the SIPP is not therefore Aus resident.

Best regards.

[Philip]

Hi Alan,

Thanks for your replies so far but I do not understand the implications of that. I did not expect the SIPP to be resident in Australia anyway, as it is a UK product that I took out in the UK.

I know pension rules can be complex and paid advice would be necessary taking into account our whole situation.

 

However I just wanted to ask generally - as currently we are UK tax residents, we have been trading various shares and ETFs with the money in the SIPP and all the gains/dividends stay there and can't be touched until UK retirement age and there are no tax implications once our contributions have been paid in.

But when we become Australian tax residents, can this continue? 

[rammygirl]

I think Alan means that the SIPP isn’t compatible with a non resident. We have a UK SIPP not yet accessed but do not need to declare anything to ATO  regarding any growth. Not all SIPPS allow non resident holders. 
You might consider transferring them to Australia if you are sure you are staying here. There are pros and cons to this and you will need to pay for advice. 

[Philip]

5 hours ago, rammygirl said:

I think Alan means that the SIPP isn’t compatible with a non resident. We have a UK SIPP not yet accessed but do not need to declare anything to ATO  regarding any growth.

Yes this is what I'm asking about - do you know this for certain and how? I will pay for personalised financial advice later, this post is meant to be just a general question.

 

5 hours ago, rammygirl said:

Not all SIPPS allow non resident holders.

Right but, that should be irrelevant to the tax situation. For example I have a UK savings account and (from other forums) if I tell the bank I will be moving to Australia they will close the account as they "don't allow" non-UK residents to have accounts. But if the bank didn't know and I earned interest, it would be taxable in Australia, same as interest from a UK bank which did know and did allow foreign resident accounts.

And a broker can't just close a SIPP and return the money to you, so not really sure how that would work.

Edited August 22, 2023 by Philip

[rammygirl]

Well we took tax advice and our accountant (dual Uk/Oz) knows about the SIPP.  They do not require any information for either tax return as the SIPP is not in drawdown nor getting any new contributions. 
My local Gov pension, however is in payment and the income is fully taxed in Aus (not in the UK) at my marginal rate.  

[Philip]

Ok, thanks. I made some general inquiries with an accountant who says if the assets are held in a non resident trust then in general there are no Australia tax obligations until transferred into personal names i.e. drawdown, which is what I guess Alan was getting at.

Edited August 22, 2023 by Philip

[Andrew from Vista Financial]

Personally, I am not aware of any SIPP Trustees that are non-UK resident nor am I aware of any Aus Resident SIPP Trustees.

In my opinion/experience a registered UK Pension/SIPP will be classified by the ATO as a foreign super fund (there may be in certain limited circumstances a situation where they are not, but I have not come across one in my 15 years practising).

Edited August 23, 2023 by Andrew from Vista Financial

[InnerVoice]

@Philip I also have a UK SIPP in which funds are traded. Coincidentally, the UK company who manages my pension moved their clients over to A J Bell's platform a couple of years ago to save costs, but were unable to move mine across because I'm no longer a UK resident. Before you emigrate I would definitely check with whoever manages your SIPP (A J Bell if you deal with them directly), what will be the situation once you move to Australia.

As previously mentioned, you will not be required to provide any information for your Australian tax return because your SIPP is not yet in drawdown. However, any lump sum or income stream you take from a pension is likely to be taxable and should be declared.

You may wish to familiarize yourself with the 'five year rule'. For the five tax years after the tax year in which they leave the UK, individuals with no relevant UK earnings can pay up to £3,600 gross into a personal pension scheme and receive tax relief. You actually only need to pay in £2,880 in any given tax year and the £720 tax relief is credited to your SIPP automatically. I found it usually took a few weeks. You may also wish to consider whether it's worth transferring your SIPP to an Australian QROPS fund once you reach 55 (professional advice needed).

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/contributions-to-registered-schemes-for-overseas-individuals/

Please bear in mind that all of the above is general advice from a well-meaning amateur, and you should get (and be willing to pay for) professional advice before making any significant financial decisions.

[rammygirl]

50 minutes ago, InnerVoice said:

@Philip I also have a UK SIPP in which funds are traded. Coincidentally, the UK company who manages my pension moved their clients over to A J Bell's platform a couple of years ago to save costs, but were unable to move mine across because I'm no longer a UK resident. Before you emigrate I would definitely check with whoever manages your SIPP (A J Bell if you deal with them directly), what will be the situation once you move to Australia.

As previously mentioned, you will not be required to provide any information for your Australian tax return because your SIPP is not yet in drawdown. However, any lump sum or income stream you take from a pension is likely to be taxable and should be declared.

You may wish to familiarize yourself with the 'five year rule'. For the five tax years after the tax year in which they leave the UK, individuals with no relevant UK earnings can pay up to £3,600 gross into a personal pension scheme and receive tax relief. You actually only need to pay in £2,880 in any given tax year and the £720 tax relief is credited to your SIPP automatically. I found it usually took a few weeks. You may also wish to consider whether it's worth transferring your SIPP to an Australian QROPS fund once you reach 55 (professional advice needed).

https://adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/contributions-to-registered-schemes-for-overseas-individuals/

Please bear in mind that all of the above is general advice from a well-meaning amateur, and you should get (and be willing to pay for) professional advice before making any significant financial decisions.

Mm. husbands SIPP was moved to AJ Bell by our UK advisor about then. No problem with us being non resident. 

[InnerVoice]

1 minute ago, rammygirl said:

Mm. husbands SIPP was moved to AJ Bell by our UK advisor about then. No problem with us being non resident. 

That's interesting. I received a general email from my pension company about the move, and then a couple of weeks later my IFA contacted me to say that it wasn't going to be possible with me being resident in Australia. Having looked at the projections I thought that the benefits to me were going to be relatively small in the medium term, so I wasn't overly concerned.

[Andrew from Vista Financial]

7 minutes ago, rammygirl said:

Mm. husbands SIPP was moved to AJ Bell by our UK advisor about then. No problem with us being non resident. 

 

59 minutes ago, InnerVoice said:

@Philip I also have a UK SIPP in which funds are traded. Coincidentally, the UK company who manages my pension moved their clients over to A J Bell's platform a couple of years ago to save costs, but were unable to move mine across because I'm no longer a UK resident.

 

I am currently dealing with a Pension Transfer to a QROPS Super for a client with an AJ Bell SIPP, he told me that they gave him notice to move it now that he is Australian Resident as they will not be able to support it for him (he recently put it into Drawdown).

I know from experience of late that many UK Pension companies are not offering drawdown to Australian Residents also and only offering the ability to access it as a single lump sum (these have generally not been SIPP providers though).

[rammygirl]

We have a zoom meeting with our UK adviser soon. I will ask specifically about this, we are not planning to drawdown yet but having decided not to transfer the pension to Oz because of tax and costs I don’t want to be forced to take it out and lose most to tax either!  The pot has grown substantially since we moved here in 2014. 
 

Do we know why there is suddenly a problem with non residents?  My local gov pension doesn’t seem to be an issue.

 

[Andrew from Vista Financial]

I am not totally certain but think it may be to do with the UK money laundering changes which may also be connected to (some) Banks starting to give notice to Australian Residents about closing their Bank Accounts (I know Barclays are doing this currently).

[Marisawright]

27 minutes ago, rammygirl said:

Do we know why there is suddenly a problem with non residents?  My local gov pension doesn’t seem to be an issue.

There was a long thread about this recently, prompted by Barclays closing accounts.  Someone who knows about these things (maybe Ausvisitor?) explained.

As Andrew says, it's to do with the new money laundering laws, which require financial institutions to do extra due diligence on non-resident customers -- and there are penalties if they get it wrong.  Some financial institutions (including Barclays) have done the cost/benefit analysis and decided it's not worth their while, taking into account the extra staff they'll need and the extra risk exposure. They'd rather just ditch those customers.

Edited August 23, 2023 by Marisawright

[Ken]

5 hours ago, Andrew from Vista Financial said:

I am not totally certain but think it may be to do with the UK money laundering changes which may also be connected to (some) Banks starting to give notice to Australian Residents about closing their Bank Accounts (I know Barclays are doing this currently).

Money laundering shouldn't be an issue since they know who you are. A possible concern is that they might be viewed as giving financial advice. They are not licensed in Australia so are breaking the law if they are deemed to be being paid to give financial advice to an Australian resident (the payment doesn't have to be directly for the advice and, clearly, they don't operate pension funds for free). I don't think just operating a draw down would constitute financial advice (and they probably don't either) but the cost of getting it wrong (or even just the cost of hiring an Australian Lawyer for an opinion to get the risk-assessors off their back) is such that they don't want to do it when there is a cheaper option of not providing the service.

[Marisawright]

1 hour ago, Ken said:

Money laundering shouldn't be an issue since they know who you are. 

But the point is, these institutions are making a policy decision not to allow non-residents to hold accounts.  Barclays is a good example of a bank that has done this.   Once the policy is in place, you'd have to be an exceptionally valuable customer for them to make an exception for you. 

[Ken]

17 hours ago, Marisawright said:

But the point is, these institutions are making a policy decision not to allow non-residents to hold accounts.  Barclays is a good example of a bank that has done this.   Once the policy is in place, you'd have to be an exceptionally valuable customer for them to make an exception for you. 

Yes, it's a policy decision to avoid the red tape and so save money. Just take the low hanging fruit (the people who are resident in the UK).

[rammygirl]

On 23/08/2023 at 12:20, rammygirl said:

We have a zoom meeting with our UK adviser soon. I will ask specifically about this, we are not planning to drawdown yet but having decided not to transfer the pension to Oz because of tax and costs I don’t want to be forced to take it out and lose most to tax either!  The pot has grown substantially since we moved here in 2014. 
 

Do we know why there is suddenly a problem with non residents?  My local gov pension doesn’t seem to be an issue.

 

Reporting back on this. There is no problem with us being non residents as long as we retain a UK advisor and UK bank account. They strongly recommend Australian tax advice when looking at drawdown (which we will do).

 Maybe people have not retained Uk bank accounts and that is the problem. 
Of course things may change going forward………..

The SIPP is with AJ Bell.

Edited October 3, 2023 by rammygirl