Further to our previous news item regarding the abolition of the Foreign Investment Fund (FIF) taxation rules in Australia, Global QROPS Ltd have been asked to comment on the effect of the removal of FIF on the advice regarding a UK pension transfer to Australia, by the Financial Times Adviser (please see link below):
In the majority of cases, for UK pension members seeking to retire in Australia, it would be far more tax advantageous to have their benefits paid from an Australian Superannuation scheme (that has been approved as a QROPS), then have their benefits paid directly from a UK scheme – where any income would be taxed at the individual’s highest marginal rate of tax in Australia (if the individual is a permanent resident of Australia).
The removal of the FIF legislation has not changed the basic premise that a tax free retirement, for a permanent resident of Australia, would be best achieved with a pension transfer to Australia. However, now allowing pension funds outside of Australia to grow free from FIF tax, means that getting the best advice on the correct timing of a potential pension transfer to Australia has never been more important.
Simply holding UK pension funds, because they can grow free from FIF, and transferring them closer to retirement in Australia, may not be the answer. The type of UK pension (ie final salary scheme) the exchange rate, the annual Australian cap on overseas pension transfers in and the tax that applies on transfers into Australia after 6 months of the member’s arrival, are just some of the other main considerations that would form part of the advice as to the timing of a UK pension transfer to Australia.
