Tax Implications of Transferring Australian Superannuation Funds to the UK

As a UK resident and holder of Australian superannuation funds, you may be wondering if you can transfer your money without incurring UK income tax. Unfortunately, the tax rules for overseas pensions are complex, but the starting point is that income from non-UK pension schemes is taxable in full in the UK. You must pay income tax on all income you receive, not just on that generated in the UK.

If you transfer your Australian superannuation funds to a UK bank account, you will be required to notify HMRC of the income received via a self-assessment tax return. The good news is that the double tax treaty between the UK and Australia seeks to eliminate double taxation on the payment of pensions. This means that you should not pay income tax in both countries. However, if tax is automatically withheld on a distribution, you can make a claim under the treaty to the Australian tax authorities to have the withheld tax refunded.

To limit the amount of tax payable, it may be beneficial to control the rate of distributions from your superannuation fund. For example, taking the full amount in one tax year will result in tax at 40 per cent on some of the income, whereas taking it over two tax years will result in tax at a maximum rate of 20 per cent. It is essential to consult with your super provider and potentially an Australian adviser to understand the taxation of your benefits and propose a solution. It is also crucial to understand the position in Australia before taking any action.

Key Takeaways:

• Income from non-UK pension schemes is taxable in full in the UK, regardless of where the distributions are paid.
• You must notify HMRC of the income received via a self-assessment tax return.
• The double tax treaty between the UK and Australia eliminates double taxation on the payment of pensions.
• Withholding tax on a distribution will be refunded if claimed under the treaty.
• It may be beneficial to control the rate of distributions from your superannuation fund to limit tax payable.
• Consult with your super provider and potentially an Australian adviser to propose a solution.
• Understand the position in Australia before taking any action.

Statistics:

• 20%: Maximum tax rate on income taken over two tax years.
• 40%: Tax rate on some of the income if taken in one tax year.
• PS81,351: Approximately equal to A$168,226.
• A$168,226: Current value of the author's superannuation accumulation plan account.

Sources:

• Estella Bogira, partner at Stephenson Harwood (pers. comm. in The Financial Times)
• HMRC (Her Majesty's Revenue and Customs)
• Australian Taxation Office (ATO)
• The Financial Times Ltd
• The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies.