EXPAT TAX | Transferring foreign retirement savings into an Australian super account

Kim Reynolds

The COVID pandemic has seen many expats return home, while others have chosen to move to Australia permanently.  If you have recently moved to Australia or returned after working overseas for an extended period you may have accumulated some foreign retirement savings during this time.  You may be wondering if you can transfer these retirement savings to Australia and combine it with an existing or new superannuation account.

Transferring retirement savings from New Zealand

Sadly, unless you are transferring your retirement savings from New Zealand, the answer isn’t straight forward and simple (it never quite is with superannuation!).  If you’re planning to move permanently or indefinitely to Australia from across the ditch, you can transfer your retirement savings from a KiwiSaver scheme to a participating Australian super fund.

What about other parts of the world?

Even if you aren’t relocating from NZ, it is possible to transfer some amounts from overseas superannuation funds. Under Australian tax and superannuation laws, in order for a direct transfer to take place, the overseas fund needs to meet the definition of what Australian law defines as a superannuation fund.  Broadly speaking, the essential characteristics of a superannuation fund are that the benefits must be solely for retirement and associated purposes.  While many foreign funds are intended to provide benefits to employees upon their retirement, they will not meet this definition where the member can access the benefits before they reach their retirement age.  An example includes where you can access the retirement savings at any age when you cease employment with your employer. In that case, the concessional rules for foreign superannuation funds do not apply.

This means that some funds in the US, such as Individual Retirement Accounts (IRAs) and 401k plans, do not meet the definition of a superannuation fund, and a direct transfer to a complying Australian super fund cannot be made.  By contrast, pension funds in the UK are considered super funds and thus direct transfers can happen, albeit under some strict and complex rules.

There are also different rules and regulations that apply in each foreign jurisdiction, which will impact your ability to transfer your foreign retirement savings to Australia.  You may be required to keep the retirement savings overseas until you reach a certain age or cease all forms of employment.  There may also be associated costs (such as tax and transfer fees), which may mean that while you can move your foreign superannuation, it might not be beneficial to do so.

In determining whether you can move your foreign retirement savings to a complying Australian super fund, there are a couple of key steps you need to undertake:

  1. The first step is to talk to the overseas fund to confirm if the transfer can take place, and whether any conditions apply.
  2. If you can transfer your foreign retirement savings to a complying Australian super fund, you then need to determine what the tax implications are in Australia and overseas.

In Australia, tax may be payable on some of the amount transferred to the Australian fund. You may also have to pay excess contributions tax.  You will have to pay income tax on the applicable fund earnings component of a foreign fund transfer (that is the income that has accrued on the benefit that has remained in the overseas fund since you became an Australian resident for tax purposes).  However, if the transfer takes place within 6 months of when your foreign employment ceased or you becoming an Australian tax resident, then no tax is payable on the transfer.

Any amounts that are not taxed in Australia from the overseas transfer are treated as non-concessional member contributions.  This means that the amounts will be subject to the non-concessional contribution cap limits, which may limit the amount of superannuation you are able to transfer.

Additionally, certain conditions must be met before your complying Australian super fund can accept a transfer from your foreign super fund.

Transfer conditions that must be met

A transfer can only occur between a foreign super fund and a complying Australian super fund if the conditions in the following table are met (source https://www.ato.gov.au/individuals/super/in-detail/withdrawing-and-using-your-super/tax-treatment-of-transfers-from-foreign-super-funds/?page=2#Transferring_amounts_to_an_Australian_super_fund).

Age limits If you are aged 65 years or more at the time of the transfer, your Australian super fund can only accept the contribution if you meet the work test.

The ‘work test’ requires a person to have worked at least 40 hours within 30 consecutive days in a financial year. People who are aged between 65 and 74 years must meet the work test to be allowed to make personal superannuation contributions.

If you are under 65 at the time of the transfer, your Australian super fund can accept the contribution even if you are not working.

Your Australian super fund cannot accept a member contribution for you if you are aged 75 or more.

Tax file number (TFN) Your Australian super fund cannot accept a transfer from your foreign fund unless:

  • you have given your Australian super fund your TFN, or
  • you give your Australian super fund your TFN within 30 days of making the foreign transfer.

If your Australian super fund does not have your TFN they must return the whole amount to your foreign fund.

Fund-capped contribution limit If your Australian super fund receives a transfer from your foreign fund which is more than your fund-capped contribution limit, it must return to the foreign fund the amount that is over your fund-capped contribution limit within 30 days.

This rule is designed to prevent you from inadvertently exceeding your non-concessional contributions cap.

You cannot claim a personal superannuation deduction for any part of the transfer from the foreign fund.

Your fund-capped contribution limit for a financial year depends on your age on 1 July of the financial year.

If, on 1 July of the financial year, you are:

  • 65 years of age or older, your fund-capped contribution limit is the non-concessional contributions cap for that financial year
  • 64 years of age or less, your fund-capped contribution limit is three times the non-concessional contributions cap for that financial year.

 Whether you are returning home to Australia or planning to become a permanent resident, there are many issues to consider as part of the big move from overseas.  The structuring and location of your retirement savings should form part of this process.  By taking a few key steps, you can ensure your superannuation continues to grow without the headache of additional penalties and tax.

At Vincents we can help you navigate the complex Australian tax and superannuation environment.

Superannuation assistance

For superannuation questions, please contact Mailene Wheeler, Superannuation Advisory Director, for assistance.

Tax assistance

For tax questions, please contact Kim Reynolds, Tax Advisory Director, for assistance.

An Important Message

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents.  Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.



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