There has been a slowdown in the number of overseas pension transfers, most notably from the United Kingdom.
This is a reflection of poor and uncertain market conditions here and overseas in the last 18 months and the appreciating Australian dollar exchange rate deterring repatriation of funds to Australia.
A tax liability can arise in Australia on the repatriation of funds from an overseas pension fund, the tax payable generally based on the growth of the fund since the client first became an Australian tax resident to the transfer date.
The only exemption available is if the transfer is done within six months of becoming an Australian resident. Where an individual has been in Australia for a long time, the tax exposure can be substantial with all the gain to be included in assessable income in the year of transfer and taxed at an individual’s marginal tax rate.
Alternatively, where the transfer is made directly to an Australian complying superannuation fund, an election is available for the gain to be taxed in the fund at a much lower concessional tax rate.
By transferring before the market is in full recovery, the assessable gain and tax exposure hopefully can be kept to a minimum. Where the concern is the high Australian exchange rate, it is possible in some funds, to maintain the transfer in a foreign currency investment pending the exchange to Australian dollars.
For more information please contact Ryan Love on 1300 856 338 or e-mail ryan.love@apexpartners.com.au.
This article is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial adviser as to whether this information is appropriate to your needs, financial situation and investment objectives.