Scotty1

I can assure you it is different- I have the tax bill to prove it, and was advised this by two different sources who deal with uk pensions and super for a living.

i agree it doesn't seem right - but if you look at it from the point of view of a pension going down in value and the exchange rate going up - that would be very unfair that they were taxed on a exchange gain - so its the value of the fund.

Kiwipaul

My opinion is you recieved bad advise. Here is an example from the ATO web site.

Example 7

In June 2005, Hassan left Australia and worked overseas. During this time, he contributed to a foreign superannuation fund. In July 2008, Hassan returned to Australia and immediately again became an Australian resident for tax purposes. At this time, his foreign super interest was valued at $12,000.

In February 2009, Hassan decided to transfer the balance from his foreign super fund to himself. The value of his super interest was then $13,500, of which $1,500 was earned since he became an Australian resident. The $1,500 represents applicable fund earnings which Hassan is required to declare in his income tax return. Hassan does not have to include the $12,000 in his assessable income.

Here is the link http://www.ato.gov.au/individuals/co....htm&page=7&H7

To me this clearly shows that any tax liability is worked out in Oz dollars.

Wol

There are several case examples buried in the ATO site: all the figures are in dollars (and I think it's reasonable to assume they are in Australian dollars.)

This to me strongly implies that all the numbers are worked in AU$ at the rate on each appropriate date. Otherwise surely the examples would show the £££ as the transferred amount?

Scotty1 has been shown the other argument. I wouldn't like to be categoric because the ATO can give opposite views depending on who you talk to.

Unless you transfer in the first six months (when so far as I can see the question doesn't arise) it's definitely worth getting a ruling if not independent advice - which might be different!

Beoz

For simplicity, can you leave it in the UK, and draw on it when you retire, regardless of where you are resident.

Wol

Of course - but you would have to consider all the parameters of how it's taxed in Australia v bringing it over, exchange rates in the future, legislative changes etc etc.

Beoz

Oddly .... if someone has monies in the UK and planned never to reside there again, it's almost worthwhile to reside there for a short period just to reset the residency status.

Kiwipaul

Unless you can read gobbledegook don't bother. I got a ruling soon after I arrived and it was 10 pages of garbage. I'm not sure these people know how to write the Queens English such that ordinary people can understand it.

Even if you obtained a ruling you would have to then pay someone to interpret it for you and I'd bet that no 2 interpretations from 2 different so called experts would come out with the same explanation.

Just because someone down here has a piece of paper saying they are qualified doesn't mean they know what they are talking about.

ALWAYS try and get a recommendation from someone you know about a so called experts ability.

Scotty1

Not wishing to be a complete anorak on this, but for the avoidance of doubt - I have 5 pages of tax calculation done by a firm of consulting australian actuaries on my pension and tax position. I would be reasonably confident that they understand the pension position better than me. I have seen the detailed calculation and the gain is worked out in GBP and that gain is transferred to AUD - and my tax bill payable by the fund and not my own income and was just over $2000.

I get further advice on what amounts I can transfer over the next three years and what the tax bill will be if I make a mistake and transfer too much.

The case study from the ATO does not deal with the currency issue - just the gain.

So in my case my fund has to cough up!

Scotty

Wol

>> The case study from the ATO does not deal with the currency issue - just the gain. <<

But it must at some point - you pay tax in $$$! What date did they pick as the conversion?

Scotty1

The date the transfer to my Oz fund was made. The GBP had moved from about 1.8 when I moved to 1.6 when I transferred

Alan Collett

I have deleted my 2 posts above, as I have been reviewing some private rulings from the ATO website on this subject.

This comment appears in one of the rulings, in the context of the conversion of a foreign currency amount into A$'s:

For the purposes of section 305-70 of the ITAA 1997, the 'applicable fund earnings' should be calculated by:

(a) translating the amount received from the original fund at the exchange rate applicable on the day of receipt to AUD; and

(b) deducting from this amount the AUD equivalent of the amount vested in the original fund at the exchange rate applicable just before the day you first became an Australian resident.


This is from another:

Therefore, for the purposes of section 305-70 of the ITAA 1997, the 'applicable fund earnings' should be calculated by translating the amount received from the foreign fund at the exchange rate applicable on the day of receipt to AUD (item 11 of the table to subsection 960-50(6)) and deducting from this amount the AUD equivalent of the amount vested in the fund at the exchange rate applicable just before the day you first became an Australian resident (item 11A of the table to subsection 960-50(6)).

305-70 deals with the taxation of lump sums from overseas superannuation funds:
http://law.ato.gov.au/atolaw/view.ht...5-75%27#305-75

The usual disclaimer applies, advising taxpayers not to rely on a private ruling which has been obtained by another person.

For those who want to browse a couple of rulings:
http://www.ato.gov.au/rba/content/1011477054313.htm
http://www.ato.gov.au/rba/content/1011573749313.htm

Best regards.

Alan Collett

http://www.ato.gov.au/corporate/cont...1666190851.htm

PS. A more recent ruling, which I think supports the above treatment.

Andrew Williams

So just to add my comments to this.

All of the UK Pension Transfers companies (including the majors & Banks) and Advisors I am aware of calculate using the pound to pound method and conversion at date of receipt.

We have a private ruling for a client in June 2009 that states:

"Therefore any amounts assesssable under the section 305-70 ITAA 1997 will be calculated in UK pounds and then converted to Australian dollars in accordance with item 7 of the table in subsection 960-50(6) of the ITAA 1997, being the daily rate of exchange on the day payment is received.

The benefits were paid on 3 February 2009. The daily exchange rate of the UK pound was 2.22423. Therefore the assessable amount of 2,070.66 GBP converted to Australian dollars is:

2,070.66 GBP x 2.22423 = $4,605.62"


We also regularly use an Actuarial firm in Australia who are very very highly regarded to calculate the historic value of defined benefit funds for our clients where the UK provider will not provide the figure (NHS for example).

Calculations for a recent client:

"THE RESULTS

The result below has been calculated taking the above data and design into account, allowing for mortality, economic assumptions and pension increases on the different components. The results are:

Transfer Amount
Date of Calculation:
23/05/2011
Total Transfer Value:
£83,270

Day Before Residency
Date of Calculation:
30/11/2007
Estimated Transfer Value:
£77,056

Hence the growth component is £83,270 - £77,056 = £6,214

Conversion to Australian dollars should be at the daily exchange rate listed on the ATO website.

If the actual value transferred is different to that shown above, since the £77,056 value does not change, the new growth component can easily be ascertained. The conversion of the growth amount to Australian dollars needs to use the official ATO exchange rate for the date of receipt. This is available from either the ATO website."



However, we recently obtained a private ruling for a client as his case was not straight forward being he had been a temporary resident for some part of his Australian residency and we believed that there may have been some exposure under the old FIF rulings.

When the private ruling came back it stated that the conversion should be done at the begininng of Australian residence using dollars and assessed against dollars when transferred in.

This of course conflicts with the above ruling and with virtually all the other companies/Advisors method.

We then asked for a business ruling on this and have been in discussions with the ATO for several weeks now.

They admit that there is a conflict in interpretation on this and that until now virtually everyone has been using the pound to pound method.

We explained the implications of this to them if they are now saying it should be assessed dollar at date of residency to dollar at date of transfer as thousands of people that have transferred and paid tax recently probably would not have had too given the demise of sterling.

We spoke to the ATO again this morning actually for an update and apparently there was a meeting held last week on this at a high level.

We have a direct contact there now so I will keep you posted on developments.


Regards

Andy

Scotty1

Hi Andy
Please let us know the outcome of this as the tax I have paid is this financial year and it will be claimed back if they change their minds on this!

however.....my betting would be that it stays the same!

Scotty

Wol

It appears to me that Collett and Williams have opposite rulings, which reinforces what has been said above about getting a *personal* ruling