Tax Aspects
Australia
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The Australian tax information below is of a general nature only. Professional advice should be sought prior to establishing an InterRetire Plan.
InterRetire has had rulings from the Australian Taxation Office and separately Top 4 International Chartered Accounting firms confirming that the fund is a Foreign Superannuation Fund for Australian income tax purposes.
To be a Foreign Superannuation Fund
i) The fund must be established outside Australia and there are no Australian assets at that time
ii) Central management and control is outside Australia
iii) Trustees are foreign residents
On the basis that the InterRetire Plan is a foreign superannuation plan, Australian tax resident members should not be subject to Australian income tax on earnings until withdrawal other than on income and capital gains sourced in Australia.
Withdrawal of Benefits from a Non-resident Superannuation Fund
Transfer of benefits to an Australian fund
Retirement Options if you are planning on permanently returning to Australia
Individual Professional Advice
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Benefits withdrawn as a lump sum from a foreign superannuation fund by an Australian resident taxpayer may be liable to Australian tax under Division 305of Income and Tax Assessment act 1997.
Generally, the assessable amount is based on the growth of benefits (excluding contributions) during residency of Australia for tax purposes since joining the fund. However, an exemption from tax is generally granted where the lump sum amount is paid within six months of commencement of Australian tax residency.
Where the benefits are drawn as a pension (income stream), the pension is fully assessable in Australia, subject to an annual tax-free “deductible amount” relating to any personal contributions made to the fund.
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The transfer of benefits from an eligible overseas fund to an Australian complying fund may also give rise to an assessable amount under Division 307 of the Income Tax Assessment Act 1997. However, by making an appropriate selection, the individual can arrange for the assessable amount to be treated as a taxable contribution to the receiving Australian fund.
This could reduce the overall tax burden on such transfers, depending on personal circumstances, as superannuation funds pay tax at more concessional rates. The liability will also be payable by the fund, rather than the individual member, allowing any tax to be funded from the amounts transferred.
In the case of a transfer, the assessable amount is similarly based on the accumulation of benefits during the period of Australian tax residency and, again, an exemption is granted for transfers made within six months of the date of resuming Australian residency (or becoming an Australian tax resident for the first time).
The above notes provide a brief summary of the legislation. This area can be particularly complex and the tax treatment of overseas benefits will be greatly affected by the personal circumstances of the individual concerned.
It is therefore highly recommended that each individual obtain professional advice which is tailored to their circumstances.
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What are your options?
Take the cash
Transfer the funds to an Australian superannuation fund
Leave the funds with InterRetire or transfer to another offshore pension fund
1. Take the cash
You can receive a lump-sum payment tax-free in Australia, provided the final payment is made within 6 months of arrival. If you take the payment after 6 months you are taxed at ordinary marginal rates in Australia on any earnings of the fund that took place after you arrived in Australia.
2. Transfer your pension balance to an Australian Complying Superannuation Fund.
A maximum of AUD$330,000 over a three year period, can be transferred from your foreign pension fund to an Australian complying superannuation fund.
Superannuation funds in Australia are subject to 15% tax on all earnings. Earnings only become tax-free in Australia when the retired member turns 60 and a pension has commenced.
3. Leave funds with InterRetire
No tax is payable in Australia on any earnings of InterRetire until you begin to receive distributions in your retirement. Furthermore, you will only be taxed on the earnings of InterRetire after your return to Australia. You can receive all other amounts from InterRetire tax-free in Australia.
If you require further tax advice please contact InterRetire enquiries@interretire.com for specific tax information and referrals to the major accounting firms specialising in the area of international retirement plans.
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Individual professional advice can be arranged in respect of the individual appropriateness of the InterRetire Trust under Australian taxation laws by a referral to the international accounting firm.
Contact InterRetire enquiries@interretire.com for more details
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The UK tax information below is of a general nature only. Professional advice should be sought prior to investing in the InterRetire Trust.
For British Expatriates working abroad and expecting to retire to the UK
The introductory information below is relevant to UK citizens who are working overseas but intend to retire to the UK. It deals with the UK tax issues of pension plans which have been established outside the UK, most of which will be set up by non-UK resident employers.
An international pension plan such as a correctly established InterRetire plan offer advantages to internationally mobile employees who do not want to have separate pension entitlements in each country of residence.
As part of a British expatriate executive's compensation planning, contributions to an international pension plan can be tax efficient for the executive in the country of residence, without a penal tax regime in the UK when the executive retires.
Typical questions raised by British expatriates working abroad include:
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Yes, A UK resident and domiciled individual will be subject to UK income tax at his marginal (i.e. top) rate on 90% of the annual pension received from the retirement plan.
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Prior to 2014 there was an Extra Statutory Concession A10 under UK Income Tax rules related to the taxation of lump sums from an international retirement plans .This concession ceased to operate in 2015 by the enactment of Extra Statutory Concessions Order SI2014/211 which inserted Section 395B of the Income Tax (Earnings and Pensions) Act 2003 “ITEPA 2003” in respect of lump sums received on or after 5 February 2014.
Section 395B includes exactly the same conditions as Extra Statutory Concession A10, that is to say the service in respect of which the right to receive the lump sum accrued (referred to reckonable service) is or includes Foreign Service being duties performed outside the UK. The conditions are that:
Three quarters or more of the period of reckonable service is made up of foreign service;
If the period of reckonable service exceeds 10 years, the whole of the last 10 years of that period is made up of foreign service; or
If the period of reckonable service exceeds 20 years, one half or more of that period including any ten of the last twenty years is made up of Foreign Service.
Individual professional advice should be sort regarding your personal circumstances.
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Provided that you and/or your employer do not contribute to the fund whilst you are UK tax resident, you will not be subject to UK tax on the growth in value.If you require further tax advice please contact InterRetire enquiries@interretire.com for specific tax information and referrals to the major accounting firms specialising in the area of international retirement plans.
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Provided that the rules of the international pension plan allow UK tax residents to make contributions to the plan, both employer and employee contributions can be made. However, as the pension plan is not a registered pension scheme in the UK, tax benefits will only be given for plans for which Migrant Member Relief (MMR) is available.
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If you die before your retirement date the pension plan will pay to your executor a lump sum amount (death in service). To avoid UK inheritance tax, the lump sum should be written in trust for the benefits of your dependants (or any other people you wish to benefit) so that the death in service amount is payable to your beneficiaries and not to your estate. You should leave a letter of wishes with the scheme trustees, detailing your beneficiaries and the amount of the fund that you wish to be paid to each.
Once you have drawn the whole of your fund on retirement, the assets formerly in the pension plan become yours unconditionally and would be subject to UK inheritance tax in the normal way.
The above information is a general summary of the UK international pension planning rules.
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As UK cross border pension rules are complex, you should seek specific independent professional advice in respect of the appropriateness of the InterRetire Plan taking account of your own personal circumstances.
InterRetire can refer you to a specialist UK tax advisor enquiries@interretire.com
United Kingdom
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Hong Kong Mandatory Provident Fund Scheme
All employees aged between 18 and 65 years must join a Mandatory Provident 'MPF' scheme unless the employee is exempt from the MPF requirements.
Questions and answers are provided below for Hong Kong employers and employees considering investing into InterRetire.
Mandatory Provident Fund 'MPF' scheme is an employment-based retirement system into which employers and employees must make contributions to fund the employees' retirement benefits. Operations of MPF schemes are subject to the Mandatory Provident Fund Schemes Ordinance which took effect from 1st December 2000.
A MPF scheme is set up as a trust and administered by an approved trustee, who processes the contributions from employers and employees, appoints investment managers to manage the assets of the scheme and provides various administrative services pursuant to the requirements of the MPF legislation.
More information can be found on the MPF website.
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The following selected categories are relevant for international employers and their expatriate employees:
Expatriate employees or self-employed persons who are given permission to work in Hong Kong for a period of not more than 12 months or covered by overseas retirement schemes.
Members of an Occupation Retirement Scheme (ORSO) which are 'exempted schemes' (as specified in the MPF Ordinance). More detailed information on 'exempt schemes' rules is provided below and can be found on the MPF website.
Members of an Occupation Retirement Scheme (ORSO) which are 'exempted schemes' (as specified in the MPF Ordinance). More detailed information on 'exempt schemes' rules is provided below and can be found on the MPF website.
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Monthly Relevant Income
Employer: 5% of income
Employee: 5% of income< HK$6,500
Employer: 5% of income
Employee: Nil> HK$6,500 - < HK$25,000
Employer: 5% of income
Employee: 5% of income> HK$25,000
Employer: HK$1,250
Employee: HK$1,250 -
Both employers and employees may make voluntary contributions if they wish.
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If an MPF scheme has already been set up for the employees, and the employer (and/or the employee) wants to make additional contributions on top of the mandatory contributions the additional contributions may be made into the MPF Scheme as voluntary contributions.On the other hand, the employer may choose to establish a separate retirement scheme as a top-up scheme for the purpose of providing additional benefits to employees.
The benefit of using a separate top up scheme to house the additional contributions is that the employer can direct the investment of the contributions whereas if contributed to a MPF scheme, the employees will control the investment of the entire contributions.
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An occupational retirement scheme set up voluntarily by the employer is regulated by the Occupational Retirement Scheme Ordinance (the 'ORSO Ordinance'), which has a wide scope and applies to all schemes operated in and from Hong Kong.
Offshore schemes providing benefits to members employed in Hong Kong are also covered by the ORSO Ordinance. Employers who operate occupational retirement schemes that fall under the ambit of the ORSO Ordinance are required to apply for registration or exemption of their schemes.
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Under section 7(4) of the ORSO Ordinance, the following categories of occupational retirement schemes may apply for a certificate of exemption:
Offshore schemes registered or approved by an authority in a country, territory or place outside Hong Kong and that the authority performs in that country, territory or place functions which are generally analogous to the functions conferred on the Registrar of Occupational Retirement Schemes (the 'Registrar') by the Ordinance.
Existing scheme (whether domiciled in Hong Kong or offshore) with not more than either 10% or 50 of that scheme's members, whichever is less, who are, on the date of application, Hong Kong permanent identity card holders.
Proposed scheme (whether domiciled in Hong Kong or offshore) with not more than either 10% or 50 of that scheme's members, whichever is less, who will be, on the establishment of the scheme, Hong Kong permanent identity card holders.
An application for an exemption certificate in respect of a scheme has to be made to the Registrar on Application Form ORS-3 which is available for downloading from the MPF website under the section 'ORSO-Forms”. Applying for exemption under the second route is a straightforward exercise and there are no onerous ongoing compliance requirements.
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Employer's contributions to an MPF scheme (including mandatory and voluntary contributions) together with any contributions to a top up ORSO scheme (if applicable) is tax deductible up to 15% of employee's total yearly emoluments.
Employers may want to make contributions to a retirement scheme so as to recognise the years of services an employee has with an employer. In this situation, the contributions in respect of their prior years of services or “special contributions” will only be deductible over a five-year period and subject to the “reasonableness” test.
Alternatively, an employer may want to set up a defined benefit scheme. Any contribution that is made to fund a shortfall can be tax deductible over a five year period, again subject to the reasonableness test.
Employee's contributions are tax deductible to the employee up to HK $15,000.
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Payout of employer's mandatory contribution and the attributable earnings are not taxable. Payout of voluntary contributions from a MPF scheme or an ORSO registered scheme upon the death or retirement is generally not taxable. If the payout is made upon a mere termination of services, there will be a 10% exemption for every year of service that the recipient has with the employer. Earnings on contributions are always not taxable.
The above is general information and should not be relied on by any person without first obtaining appropriate legal or tax advice from a professional qualified in Hong Kong).
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Individual professional advice can be arranged in respect of the appropriateness of the InterRetire Trust under Hong Kong taxation laws by a referral to a number of Hong Kong international accounting firms.
For further enquiries, please contact InterRetire: enquiries@interretire.com