Anything to Declare? Moving Foreign Superannuation to an Australian Fund
Australians returning home with overseas superannuation or pension benefits have two main options in relation to transferring those entitlements into the Australian superannuation system, namely:
transferring the overseas retirement savings into an existing Australian superannuation fund (Transferring); or
withdrawing overseas retirement savings as a lump sum and bringing it into Australia personally (Withdrawing).
Both Transferring and Withdrawing have distinct legal and tax consequences. The best strategy will depend on:
the type of foreign fund;
the location of the foreign fund; and
your broader tax and succession objectives.
Transferring Foreign Super
For Australian tax purposes, an overseas fund must meet the definition of a ‘foreign superannuation fund’ as not all overseas retirement accounts will qualify. The fund must also allow transfers to an Australian superannuation fund and some countries, including the United Kingdom, have strict conditions on overseas transfers.
Australian tax law generally treats a transfer of benefits from a foreign fund to an Australian fund as a superannuation contribution. This means that Transferring could result in exceeding your annual non-concessional super contributions cap and a high tax rate of 47% on those contributions may apply.
Whether tax is payable depends on a variety of factors, including:
whether you were an Australian tax resident;
when you ceased foreign employment; and
the interaction between Transferring and your contribution caps.
Transferring offers advantages and disadvantages.
Such advantages include:
concessional tax treatment on earnings; and
the potential for some transferred amounts to be tax-exempt.
Disadvantages include:
access is generally restricted until a condition of release is met (attaining 60 years of age or ceasing employment); and
risk of excess contribution tax if contribution caps are exceeded.
Withdrawing Foreign Super
Where Transferring is unavailable or undesirable, superannuation benefits can be withdrawn as a lump sum and paid to either:
you personally; or
another entity at your direction (i.e. an alternative investment structure).
Similarly to Transferring, the rules of the overseas fund and the laws of that country will impact the availability of Withdrawing. Prior to Withdrawing, specific advice should be sought to confirm that a withdrawal is permitted by the overseas fund.
Australian tax law may treat a lump sum withdrawal as a distribution from a foreign trust which may result in all or part of the amount being subject to tax. This does not mean that the entire lump sum is assessable and advice should be sought prior to withdrawal.
Like Transferring, Withdrawing has its own advantages and disadvantages.
The advantages include:
immediate access to funds; and
greater flexibility for investments.
Disadvantages include:
foreign tax implications; and
Australian tax implications pursuant to the trust distribution rules.
How Do You Move Foreign Super to Australia?
The answer is: it depends. There is no one-size-fits-all response to moving foreign superannuation benefits to an Australian superannuation fund. There are a variety of factors that will impact a strategy’s availability and suitability.
Once a transfer or withdrawal is made, it is often irreversible. To ensure that an option is the best for your circumstances and long-term objectives, our team can assist.
For more information in relation to superannuation, please contact:
Alasdair Woodford
Principal
T: 03 5225 5217 | M: 0436 456 144
E: awoodford@ha.legal
Joseph Flanagan
Senior Associate
T: 03 5226 8504 | M: 0491 307 550
E: jflanagan@ha.legal
Tayla Berger
Senior Associate
T: 03 5226 8559 | M: 0407 825 365
E: tberger@ha.legal
Jemimah Fitzgerald
Lawyer
T: 03 5225 5219
E: jfitzgerald@ha.legal
Prepared with the assistance of Pippa Duniam
