QROPS Tax Advice

As per Section 305-70 of the Australian Income Tax Assessment Act, the transfer of your UK Pension fund to Australia is a taxable event. The growth (applicable fund earnings) of your UK Pension fund since the date of your Australian residency is taxable. With your signed election to do so, the growth will be assessed as a taxable contribution and the 15% superannuation fund tax to be paid from the receiving fund. If you do not make this election, the growth will be assessed as personal income and taxed at your marginal tax rate for the financial year end.

Non-Concessional Contributions Limits:

Please note that fund value as at date of Australian residency will be received as a Non­-Concessional Contribution (NCC).

Effective from the 1″ July 2024 the NCC cap is $120,000 pa thus $360,000 bring forward.

If you have more than one UK pension transfer, the sum of the values of your UK Pension funds as at the date of Australian residency will contribute to the NCC cap.

HMRC Amendments – in relation to transfers received on or after 6th April 2017.

Recent UK regulation changes (retrospective to 6th April 2017) now dictate that transfers received on or after the 6th April 2017 must remain in the ROPS environment (a ring-fenced transfer) for the longer period of either:

• The balance of the UK tax year plus 10 years since you were last a UK resident (the non-UK residency rule) or
• 5 complete years since the date the transfer was received by the Australian fund.

This means that even if the member has been non-UK resident for longer than 10 full UK tax years, the member payment charges (unauthorised payment) can still apply if it is less than 5 years since the funds were transferred from a registered UK pension scheme.

Therefore, if you were to rollover to a non-RO PS fund (prior to satisfying either of the above), it will be deemed an ‘unauthorised payment’ and taxed up to a maximum of 55% by HMRC.

Furthermore (until satisfying the abovementioned requirements), there are limits as to the amount you can access in retirement (assuming the Australian ‘preservation’ rules are met).

• The maximum amount of your retirement benefit which can be taken in cash is 25%;
• Any pension payments must comply with the current UK legislation.

Overseas Transfer Charge • UK Budget (9th March 2017)

• For transfers of UK pension fund benefits requested on or after the 9th March 2017, a tax charge of 25% will be imposed (HMRC) if the member concerned is not a tax resident of the country where the receiving ROPS fund is registered as at the date of transfer.
• The objective is to penalise (discourage) the transfers to tax advantaged destinations where the member has no intention of residing and or retiring, i.e. typically UK resident’s transferring to Malta ROPS.
• Therefore, members can continue to transfer their UK pension funds to a new country of residence without paying any (UK) tax impost.
• The tax would however be chargeable (for example) if an Australian tax resident transferred their UK pension funds to New Zealand, Gibraltar or Malta etc.
• If having made the transfer from the UK pension fund to the Australian ROPS, the member ceases to be an Australian tax resident within the ‘relevant period’, then the 25% tax will be chargeable as if it had been chargeable at the time of transfer.
• The relevant period is five complete (UK) tax years from the date of the transfer.

A Statutory Residence Test (SRT) that determines whether someone is considered a UK resident for tax purposes came into force on 6th April 2013. Given the significance of this issue and the comprehensive new detail, please refer to this link for the details of SRT.

We are QROPS tax advice specialists, please feel free to contact us if you have any questions relating to the QROPS tax implications. Our costs for QROPS tax advice range from $550 to $2,200 based on the complexity of the matters.