Provided by Mercer: 29/1/09
The global financial crisis has hit job markets hard in places Australians have traditionally, found employment. For instance London, New York and the Middle East. As many now head home, often after long stints overseas, should they also be bringing home any super or pension benefits saved?
Most Australians who live and work overseas for an extended period of time are likely to have accrued a benefit in a foreign super fund or pension scheme. This raises the question of what to do with any super they may have saved overseas – should it be brought back to Australia and, if yes, what are some of the implications?
The answer isn’t straightforward. Here are some things to consider.
If you bring your super home:
- You may have to pay Australian tax on your transfer. Generally, if you receive or transfer your super benefits within six months of becoming an Australian tax resident, it will be tax free in Australia. If the super benefits are transferred after the six-month period, tax will apply on the ‘profit’ part of your transfer (i.e. the earnings on your foreign super fund since you became an Australian resident for tax purposes). The taxation rules may get complicated and we recommend that professional advice be sought in both Australia and the country of source as rules and regulations vary. For example, pension benefits accrued in the United Kingdom must be transferred to a Qualifying Registered Overseas Pension Scheme (QROPS), otherwise significant tax penalties may apply.
- There are limits to how much can be transferred to an Australian complying super fund. Generally, an Australian super fund can’t accept a transfer from a foreign super fund of more than AUD$450,000. This may count towards your non-concessional contributions cap and you should consider how much in personal contributions you have made to superannuation so the cap isn’t breached.
- An individual cannot transfer (or roll over) their Australian complying super fund benefits to a foreign super fund under any circumstances. A person may take their super benefits from an Australian complying super fund when they retire (after reaching preservation age) or reach 65. Therefore, individuals who do not intend to permanently retire in Australia should consider carefully whether it is appropriate to transfer their foreign super funds to an Australian complying super fund.
- There may also be tax implications on transfers of overseas funds in the source country. To determine what these are – and whether they’re prohibitively high – it is recommended that individuals speak to a professional tax adviser in that country.
If you leave your super overseas:
- The type of retirement benefit that the foreign super or pension scheme pays is an important consideration. Is it a cash lump sum benefit at retirement, or does it pay a lifetime pension (which may be attractive to some people and, therefore, offer a good reason for leaving it overseas).
- As an Australian resident (who is a permanent resident) for tax purposes, you are taxed on worldwide income. That means you will have to pay tax on the pension income you receive from your foreign super fund, even if tax was withheld from the payment in the foreign country. (In this case you can claim a foreign tax credit on your tax return if you aren’t entitled to a foreign tax refund from that country). In contrast, if you receive pension income from an Australian (taxed) complying fund, tax is not payable if you are aged 60 years or over.
- There are also a number of risks associated with retaining funds overseas including currency risk (your overseas investments may gain or lose value as a result of a falling or rising Australian dollar) and liquidity risk (you may be unable to redeem your overseas investment at your chosen time).
Finally, consider your estate plan:
- In particular, it may be that the jurisdictional nature of wills means you need more than one will because a will made in Australia may not be able to deal with assets held offshore.
As you’ve probably gathered, the repatriation of your foreign super/pension benefits is a complex area and we recommend that you seek professional advice here and in the country where you’ve been working, prior to making a decision.
More information
- To speak with a Mercer financial adviser about options for your super, call
1800 633 403. - Find out more about transferring super money from an overseas fund to the
Mercer Super Trust.
This information has been prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 for general information only. The information does not take into account your personal objectives, financial situation or needs. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult a licensed or appropriately authorised financial adviser before making any investment decision.
