Kiwipaul

Must admit I don't understand WHY you need a personnel ruling.

This is a pretty fundamental question to do with pensions which affects EVERYONE who has a pension anywhere in the world and wishes to transfer it to Oz. It's not complicated it's very straight forward.

If the ATO office cannot give a straight ans to such a fundamental question they should resign.

But that won't happen because whatever b*lls up civil servants make here they are just patted on the back and told to try again.

Alan Collett

Thanks Andrew.

Do you have the ruling number for your client, please?

Are there any tax accountants involved in your ruling application? If there are I am fairly sure they would have been steering the argument towards the base point being calculated with reference to the exchange rate at the commencement of residency, to align with the CGT cost base calculation where CGT assets are owned when arriving in Australia.

Best regards.

Alan Collett

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

Again, are there no tax accountants involved? At the risk of being provocative, why are financial planners involved in computing tax liabilities?!

Alan Collett

Scotty,

If you obtained a tax ruling you are bound by the decision.

If you did not - lodge an amended tax return (subject to any further guidance material published by the ATO).

Best regards.

Kiwipaul

You should be able to work it out yourself. You know the value when you arrive and the value when you transferred, just use the relevant exchange rates to work out you tax liability. Then do yourself what Alan Collett suggests.

You are correct if you wait for your so called experts to do it you will wait forever because that would mean them admitting the don't understand the rules.

It took me all of 10 min to find my example on the ATO web site.

I don't consider your tax experts (so called) fully to blame the ATO must accept some responsibility for contradictory ruling but going after them jeopdises your chance of getting a successfully refund.

Kiwipaul

Just occurred to me in every other CGT situation in Oz (providing it's held for 12 months) the tax office allow 50% of the gain tax free does the same apply to pensions.

This could make one hell of a difference to tax liability.

Alan Collett

There's no 50% discount for the gain computed under section 305 of the ITAA 1997.

Best regards.

Kiwipaul

Thamks Alan

Seems to me that here is another reason to leave your super in the original country.

If you can maybe cash it in then transfer it to Oz because in this situation you could then claim 50% of the gain as tax free (because it's just a capital gain transaction) rather than pay tax on 100% of the gain doing a transfer. You would also save on fees as their would be no complicated transfer.

Also once it's in Oz you could then do an after tax contribution as you are allowed to contribute $450,000 over a 3 year period (providing you are under 65).

I've no idea what the rules are for cashing in a pension this is just a suggestion.

Alan Collett

Not sure that I follow the strategy you are suggesting, KP - it is generally best to take professional advice.

I know some baulk at doing so because of perceived bias, but a genuinely professional advisor would act in his or her client's best interests. Not doing so risks a PI claim.

Also, don't forget that pension transfers can take place to jurisdictions other than Australia in an effort to improve the after tax position at retirement, particularly if you have more than A$600k to transfer - at this time of the financial year one might be looking at A$150k before 30/06/2012 and A$450k in July or August.

Best regards.

carzinoz

I don't know what the rules are for cashing in your pension once you reach pension age but I am currently trying to move a small amount from a UK pension fund over to Oz. Cashing it in is not an option, presumably because of tax implications. It has to be paid in to an Oz pension which is QROPS registered with HMRC. I've been told that the amount paid in to the new super account from the UK is tagged in some way and if I do anything with that money HMRC are informed. This is to prevent people transfering it to Oz then cashing it in before pension age which would in effect mean they paid less UK tax on that income than they should have.

Kiwipaul

Not sure I understand this as my understanding is you are entitled to transfer $150,000 of after tax income to super per year or $450,000 max over a 3 year period.

eg you transfer $450,000 now but you couldn't transfer any more for 3 years because you have used up this years allowance and the next 2 years.

I fully understand that you don't want to divulge tax avoidance strategies as this is what you are paid for and if you have found a way around this good luck to you. You provide plenty of free accurate advise anyway.

jorgon

Andy

Thank you for offering to keep everyone informed on developments on this question. As you say, it has considerable importance where the exchange rate is changing rapidly.

And thank you Alan for taking the time to provide links to some relevant rulings.

Regards

louie

I haven't really got to grips with Australian pensions.....

In the UK, in general (talking about defined contributions schemes), you make a contribution and get tax relief on the contributions at your marginal tax rate (either at source or partly at source and partly through the tax system), the pension fund grows free of tax and when you retire you take a 25% tax free lump sum (if you want to) then buy an annuity with the rest, which is treated as taxable income.

How does it work in Australia? And does it make a difference if the fund has been transferred from the UK?

jorgon

The basic concept behind the Australian superannuation scheme is straightforward: you can put money and assets in a superannuation fund and if you are self-employed you can obtain personal tax relief in doing so. If you are employed, your employer is obliged to make superannuation fund payments for you (you do not pay personal tax on this money). You can't get your own contributions out of the fund until you reach a certain age or on retirement. If the fund's rules allow it, on leaving employment at any age you can take the benefit of your employer's contributions by taking a pension or annuity. If you are not yet 60 when you take the money out, it will be taxable in your hands although some tax concessions may apply when you are near to 60. After the age of 60, it will be tax free in your hands. The basic aim is to provide you with a decent level of capital and income later on in life.
As for the internal tax treatment of the fund, before the fund starts to make any payments to you, it pays tax of 15% on its income and also on any contributions for which a tax deduction has been claimed. After the fund starts making payments to you, it will not pay tax on the income from the assets set aside to enable those payments to be made.
See my article: Australian superannuation - how it works for more information.

Yes it does. There are restrictions on the type of investments, transfers-in and withdrawals have to be timed carefully and there are reporting requirements to HMRC.
See my article: SMSF - main issues for uk migrants for more information.

spuddyo

My wife recently enquired about what would happen to her UK RBS pension of 25 years in the event of her death. It seems I would get a very small pension ( which if I lived to be 100 would only be about 30% of the money invested ) but the balance of the fund would be just gobbled up buy the insurance company / UK government. The balance of the fund it seems, does not get paid out which came as a big surprise to both of us.

If I am not mistaken, my fund in Australia pays out a substantial sum on my death and a small pension for my wife. When she dies any balance left in the fund is paid out to my family. We will be making more enquiries, but based on this we will be transferring her UK RBS pension to Australia very soon. It looks like if it's here in Australia we are more likely to get most of the money out of the fund. I know the insurance companies have to make a profit, and I know it's a bit of a gamble, but it looks like left in the UK this fund is just going to disapear if left there.

I'm not very good with this kind of thing, but the UK fund payout doesn't seem right to me. Surely if somebody puts $500k into a pension fund, so long as the fund grows that money should be paid out - after all it's "your" money, isn't it ?