Wol

Assuming we get our visas, we'll be in the position of retirees living in Oz off our UK company pension.

How would we be taxed? (Apart from "heavily", to forestall the inevitable cracks)

Do we have to save up all year and pay the ATO a chunk at the end of the year, or is there some arrangement like PAYE whereby we can pay so much per month?

TIA

Grayling

'Assuming we get our visas, we'll be in the position of retirees living in Oz off our UK company pension.

How would we be taxed? (Apart from "heavily", to forestall the inevitable cracks)

Do we have to save up all year and pay the ATO a chunk at the end of the year, or is there some arrangement like PAYE whereby we can pay so much per month?'

Interesting question Rog.We will be in the same position as both my wife and I will have UK pensions but will probably work for a while as well.
I was intending to find this out before we leave but would be interested in any answers.

G

gld

Depends on how you have structured your pension, if you have drawn it - that is one thing, (there are still tax reducing options) Australia has some wierd and wonderful ways of dealing with UK pensions - it does not recognise that you have a pension as such as UK does - your best bet is to work on the UK raw pension and see whether there will be a 27CAA charge and then see if re-basing can eliminate a substantial portion of the tax. Watch for developments in this area. All depends on what you do with your pension. It might be best to use the Allocation Principle if you are concerned as to widows benefits with changes that have resulted in the 410 Visa with regard to showing that you "have adequate means of support"

If you can get the tax down then adequate means of support becomes easier.

Kind Regards

Wol

>> Depends on how you have structured your pension, if you have drawn it - that is one thing, (there are still tax reducing options) Australia has some wierd and wonderful ways of dealing with UK pensions - it does not recognise that you have a pension as such as UK does - your best bet is to work on the UK raw pension and see whether there will be a 27CAA charge and then see if re-basing can eliminate a substantial portion of the tax. Watch for developments in this area. All depends on what you do with your pension. It might be best to use the Allocation Principle if you are concerned as to widows benefits with changes that have resulted in the 410 Visa with regard to showing that you "have adequate means of support"

If you can get the tax down then adequate means of support becomes easier. <<

Thanks for the reply, but you have misunderstood just about everything!

I am drawing my pension now: it is a company final salary pension and I will not be on a -410 visa.

I agree however that the less tax I pay the better!

kentcoast

Is it worth you looking at some of the postings from Alan Collet it is the sort of info he would post or redirect to a web site.

gld

If you are drawing the pension then its down to Undeducted Purchase Price calculations. From what I discerned it was a 410 and a pension potentially not in payment - sorry I misunderstood. As it is a final salary scheme and has gone straight to final salary pension payout then your planning is effectively limited to the UPP.

It does work in certain situations moving a final salary to another UK pension scheme. I hasten to add that it would be improbable that this would work if one was remaining in the UK - unless certain circumstances prevailed.

It is the way the tax system works in Australia and the conundrums created by UPP. The UPP creates what is referred to a step-up, i.e. a tax advantage - you would not get this benefit if you were remaining in UK, in Australia it can cause a dramatic increase to the non-taxable component. It seems unlikely but the way the two systems interlink causes this to sometimes happen - there was an article in the Money Pages of the Times on Saturday 17th January on an Australian situation which hinted at this opportunity. If you need more technical detail please contact me and I can forward our submission papers of examples to the Australian Senate Enquiry of how UK pensions interacted with the Australian Legislation - we were specifically contacted by the Enquiry Team to brief the Australian Senate Committee - pre witness statements being given.

Anybody who does give advice in this field must of course be regulated.

Hope this clears the situation up.

PS UPP creates less tax

OzTennis

Yep:

http://www.timesonline.co.uk/newspap...965223,00.html

Wandering couple seek the best of both worlds
Alison Gibson helps to plan a long-term passage to Australia

BRITISH banks get a big thumbs-up from Doug Wheadon, an Australian impressed by the lack of charges for everyday services. “Back home you pay just to have a bank account,� he says. Other sides of Britain that this new UK resident appreciates include the beautiful countryside, the variety of goods in the shops and cheaper cars.
But Down Under has its own attractions, too, so he and Wendy, his British wife, hope to have the best of both worlds. “We will probably move back to Australia in ten years’ time. We like the sense of space and the outdoor lifestyle,� he explains.

Their long-term financial goal is a simple one — not to be struggling for income when they reach the age of retirement — but the right strategy is far from straightforward when you have a financial foot in more than one country.

The couple prefer to live in Britain now because Wendy, 30, wants to complete her full service as an officer in the RAF. Doug, 33, a former major in the mechanical engineering corps of the Australian Army, is happy to be the main carer for Katriona, their one-year-old daughter, and is training for a new career as a maths and science teacher.

Wendy earns a gross salary of £26,000, which will rise to £30,000 in September when she is promoted. They do not find it a constraint to live on one income. “We live comfortably, but not expensively,� Doug says. “I learnt the value of budgeting at a young age. I like to plan for the future and to know where my money is going.�

In 2013, when Wendy can retire from the RAF, they plan to move to the Antipodes. By that time, Katriona may have one or two brothers or sisters. “We’d like our children to experience the Australian way of life before they reach high-school age,� Doug says.

The family live in army quarters at a cost of £330 a month. Wendy owns a house in Scotland, valued at £70,000, in which her parents live, and has no mortgage on the property. Rather than put down roots in England, where she is based, they think it would be more prudent to invest in a future home in Australia.

Their chosen property would cost between £84,000 and £105,000. They plan to buy in 2005 and let the house until they move. “We have worked out that we could afford it even if the house was without tenants,� he says.

Funds for the purchase fees are to hand in Australia and they are saving in the UK towards a £16,000 deposit. An Australian investment loan would cover the remaining cost. “But how should we transfer money abroad and what is our tax position?� he asks.

WHAT THE EXPERTS SAY

INVESTMENT

Mark Dampier, head of research, Hargreaves Lansdown

“Given their wish to buy a house in Australia, most, if not all, their spare money should be kept as cash savings. They are not in a position to invest in the stock market.

“Start with cash mini-Isas. Individuals can save up to £3,000 a year each and interest is tax-free. Intelligent Finance’s 4.35 per cent is one of the best rates on offer. Away from Isas, the best no-nonsense account with instant access I can find is the ING account, at 4.3 per cent.

“After they have bought the house, I would not tie up any money in long-term investments before accruing a cash buffer. I suggest keeping at least £20,000 in instant-access accounts in case of unexpected problems.�


PROTECTION

Kevin Carr, senior technical adviser, LifeSearch

“They would like to take out life cover for Doug, and have a budget of £200 a year. I would recommend family income benefit, which is paid as annual income. This is more suitable should anything happen to Doug while Katriona is in her early years.

“A term of 20 years would provide for their daughter until she is 21. Bright Grey would provide cover of £19,500 a year, which would be paid out for each remaining year of the policy in the event of Doug’s death. For example, if Doug were to die after five years, almost £300,000 would be payable over 15 years.

“Critical illness cover is expensive compared with life cover. Keeping the premium at £200 a year would reduce the cover to a little less than £5,000 a year with Standard Life. Either way, the policy can be placed in trust, or written as ‘life of another’, to speed payment of benefits and avoid any potential inheritance tax.�

TAX

David Kilshaw, tax partner, KPMG

“Doug and Wendy have modest means, but are in a complicated position. They need to consider the tax laws of both Australia and the UK and the double tax treaty between the two countries. They must then establish which tax rules apply to them and how they can maximise the benefits. Timing, such as when to sell Wendy’s house in Scotland, and regular reviews of their position are vital. Tax laws change quickly.

“Doug is taxed in the UK on income arising within the UK, but he is taxed on income outside this country only if he brings it here. This is because he is domiciled in Australia. In practice, Doug is subject to income tax in Australia only on income that arises there. He can get a credit in the UK for any tax paid in Australia.

“They can receive tax-free returns from cash mini-Isas while they are in the UK. However, Doug cannot avoid tax simply by making investments offshore. He could then pay tax on these in Australia.

“The couple would be subject to tax on any rental income from the house in Australia, but this should be allowed as a credit against their UK tax bill. Of the tax rates in each country, they should expect to pay the higher of the two. They can claim deductions for things such as mortgage interest and depreciation of fittings.�


MIGRATION

Geraint Davies, managing director, Montfort International

“They should not consider any long-term contract that falls foul of the Australian Foreign Investment Fund (FIF) legislation. This can, in certain situations, include proceeds in the event of death or critical illness. Children are also not exempt from the implications of FIF. They should also keep an eye on inheritance tax laws as their assets grow. I would suggest that Doug arranges interim life cover in the UK but, when he next visits Australia, sets up long-term cover there.

“The couple need to examine their pension options more closely, because these are broader than they may think. It could be more tax-efficient for Wendy to transfer to the Royal Australian Air Force before she has completed her service. Wendy is eligible for an Australian spouse visa and I would look at getting this sooner rather than later. I would also be inclined to purchase the house in Australia in joint names, but bear in mind that the house in Scotland could become an asset liable to capital gains tax.

“I would not use a high street bank to transfer the eventual house deposit to Australia. Instead, consult an exchange rate specialist such as Halewood (www.hifx.co.uk). Over the past 12 months, £1 has been worth between A$2.32 and A$2.88, a difference of almost 25 per cent.�

WENDY'S RESPONSE: “Additional life cover is something that we have to sort out. Although we both have benefits through service in the Armed Forces, it may be best to supplement this. The quotes given for life cover would pay for little more than nursery fees and other childcare costs.

“I understand my visa options, but we will do more research into our pension position. I would consider moving to Australia sooner if it is possible to join the Royal Australian Air Force.�

DOUG'S RESPONSE: “We were aware of cash mini-Isas and high-interest savings accounts, but we were unsure if this was the way to go. The advice confirms what we have heard — that you can only get really good returns from the stock market if you can afford to put some money away for a significant length of time and forget about it.

“I have to fill out a tax return in Australia every year. The situation is confusing, but the advice has been useful. We will heed the warning on the cost of money transfers.�

Geraint was too modest to point out that he was one of the contributors to the article which I happened to read co-incidentally

OzTennis

Wol

Geraint:

What is Undeducted Purchase Price?

BTW I am unable to move my pension fund in any case. My understanding is that I just get it paid in Oz and pay Oz tax on the payments.