Can I transfer my Foreign Super Plan to my Australian Super Plan? The basics.
We have been working with a number of long time Australian expatriates who have accumulated large foreign superannuation plans to an Australian super fund.
In this article, we'll explore the tax implications of transferring foreign super funds to Australia and the process involved.
Tax Implications for Transferring Foreign Super Funds to Australia
When transferring foreign super funds to Australia, it's essential to consider the tax implications that may arise. The amounts you transfer from your foreign super fund may be taxable in Australia, and there may be additional obligations specific to the issuing country. Let's explore two ways to transfer these funds and the corresponding tax considerations.
Transfer to Your Australian Super Fund
If you decide to transfer your foreign super fund to your Australian super, it's important to note that it may count towards your contribution cap. Excess contributions tax may apply if the transfer exceeds the cap. Several factors, including your age, the tax year, and the type of contributions, can affect the application of excess contributions tax.
To transfer your foreign super fund to your Australian super, you must have an Australian Tax File Number (TFN). Additionally, the contribution cap for your age determines the maximum amount you can transfer. Any interest earned from the foreign super fund that exceeds your contribution cap will need to be returned.
To ensure a smooth transfer and avoid paying unnecessary taxes, it's recommended to consult a tax specialist familiar with expat tax returns in Australia.
Transfer to Yourself
Alternatively, you can choose to transfer your foreign super fund to yourself. In this case, you may be liable for tax on the earnings from the lump sum payment. The earnings are included in your assessable income and taxed at your marginal income tax rate. However, the remainder of the transfer is not subject to income tax.
The tax treatment of the earnings depends on your residency status for tax purposes at the time the earnings apply. If you're unsure about how the earnings will be taxed, you can refer to Section 305-307 of the Income Tax Assessment Act 1997. It's worth noting that seeking the help of a tax professional can provide further guidance on your Australian tax return.
The Process of Transferring Foreign Super Funds to an Australian Super Fund
Now let's explore the step-by-step process of transferring your foreign super funds to an Australian super fund. It's important to note that the process may vary based on individual circumstances and the specific requirements of the foreign super fund. However, the following steps provide a general overview:
1. Contact the Overseas Fund
The first step is to contact your overseas fund and express your intention to transfer the funds to an Australian super fund. During this communication, inquire about any tax implications, exit fees, and other considerations involved in the transfer. The overseas fund may provide you with the necessary forms to complete the transfer process.
2. Obtain an Australian Retirement Trust Overseas Pack
Next, reach out to the Australian Retirement Trust and request an overseas pack. This pack will contain essential information about transferring your overseas fund, including the requirements set by the Australian Retirement Trust and an Australian Taxation Office (ATO) tax form. Ensure that you include the Australian Retirement Trust's fund ABN: 60 905 115 063 in the necessary documents.
3. Complete and Submit the Overseas Fund Paperwork
Complete the paperwork provided by the overseas fund, making sure to include the details and payment requirements of the Australian Retirement Trust. The specific information required for the transfer may vary depending on the fund. However, you can find general guidance in the Australian Retirement Trust overseas fund pack.
4. Provide Your Australian Tax File Number (TFN)
To proceed with the transfer, you must provide the Australian Retirement Trust with your Australian Tax File Number (TFN). You can do this by visiting the Member Online portal. The overseas fund will make the payment to the Australian Retirement Trust via cheque or electronic funds transfer (EFT). It's worth noting that EFT transfers are generally faster than cheque payments.
Please be aware that bank fees may be deducted from the transferred funds before they are credited to your Australian Retirement Trust account. If needed, you can request confirmation of the final figure upon receipt of the funds.
5. Application of Funds to Your Australian Retirement Trust Account
Once the Australian Retirement Trust receives the transfer of funds, they will be applied to your account. You will receive a confirmation letter from the Australian Retirement Trust, detailing the payment and the total amount converted to Australian dollars (AUD).
6. Complete ATO Form for Tax Options
To determine the tax treatment of the transfer, you need to complete a form available in the overseas fund pack or on the ATO website.
The form is called "Choice to have your Australian fund pay tax on a foreign super transfer" (NAT 11724). It allows you to choose between paying tax at your personal marginal income tax rate or having the Australian Retirement Trust pay the tax on your behalf at the concessional rate of 15%. The latter option involves including the tax amount in the fund's assessable income.
Before requesting tax deduction, it's advisable to seek financial advice to ensure the most suitable option for your circumstances.
Commonly Asked
Will my transfer amount be taxed in Australia?
If you transfer your overseas funds within six months of becoming an Australian resident or terminating your foreign employment, generally no Australian tax is payable. However, if you transfer your overseas funds after six months, the transfer may include "applicable fund earnings" that are subject to income tax in Australia. The non-applicable fund earnings amount is not subject to income tax in Australia.
What are applicable fund earnings?
Applicable fund earnings refer to the earnings on your foreign super balance that have accrued since you became an Australian resident. Calculating the applicable fund earnings can be complex, so it's recommended to seek financial advice or contact the ATO for assistance.
What are my tax payment options for applicable fund earnings?
When transferring funds that include applicable fund earnings, you have two options for paying the tax:
Pay tax at your personal marginal income tax rate, with the tax amount calculated as part of your income tax assessment for the financial year.
Request the Australian Retirement Trust to pay the tax on your behalf at the concessional rate of 15%, with the tax amount included in the fund's assessable income.
How is the 15% tax paid?
To facilitate the deduction of tax, you must complete the "Choice to have your Australian fund pay tax on a foreign super transfer" form (NAT 11724) from the ATO. The form provides instructions on how to proceed. It's important to carefully consider your options and seek financial advice if needed.
How InterRetire Can Help You
If you’re an Australian expatriate who is considering moving back to Australia, we can help you maximise your assets, minimise your tax obligations and help you transition smoothly.
Disclaimer: This article provides general information on avoiding double taxation in Australia and should not be considered as professional tax advice. It is recommended to consult with a qualified tax advisor or accountant for personalised guidance based on your specific circumstances.
