While the Australian superannuation system is unique, there are a number of other retirement savings schemes available in other countries. If you’ve worked overseas, you may have paid into one of these plans. While sometimes you are required to leave it in the foreign fund, in many other cases you can transfer it into your Australian superannuation account.
Transferring savings from New Zealand
If you’re migrating from New Zealand, you’re in luck when it comes to moving your retirement savings. Thanks to the Trans-Tasman retirement savings portability scheme, transferring funds between a KiwiSaver scheme and a participating fund regulated by the Australian Prudential Regulation Authority (APRA) can be easy. As outlined by the Australian Taxation Office (ATO), you will need an Australian tax file number and to provide details to your KiwiSaver fund about the funds you are transferring and their destination.
According to the ATO, following the transfer your money will be predominantly subject to Australian regulations, except for some specific rules governing transferred KiwiSaver accounts. For example, you must hold your savings in an APRA-regulated fund, you cannot transfer it to a self-managed super fund and the age at which you can access your super is the same as New Zealand’s retirement age, which is 65 as at the time of writing.
Transferring savings from other countries
Transferring your retirement savings from other countries can be a bit more complicated and the rules and process for your personal situation will depend on where you’re transferring the savings from. For example, as the ATO points out, there are specific rules that apply if your savings are coming from the UK. Make sure to check the originating country’s regulations and with the scheme’s operator so you’re not caught unawares by any laws or fees.
Broadly speaking, according to the ATO you must be considered an Australian resident for tax purposes to transfer funds into an Australian super fund from overseas. This simply means that the ATO considers Australia to be your usual home, and is quite different than being a resident under immigration law. Typically, the ATO indicates if you are in Australia for 183 days in a financial year, you are an Australian resident for tax purposes. You must also have a tax file number (TFN) and provide it to your Australian super fund within 30 days of making the transfer. If your Australian super fund does not have your TFN they must return the whole amount of the transfer to your foreign fund.
If you’re under age 65, your Australian super fund can accept the contribution regardless of whether you’re working, but the standard work test for contributions applies once you turn 65. This requires you to have worked a minimum of 40 hours over 30 consecutive days within the last financial year. If you are aged 75 or over, you can’t bring your overseas retirement savings into an Australian super account at all.
How much can you bring in?
The next issue to consider is how much money you want to bring into the Australian super system. Barring schemes like the one between Australia and New Zealand, according to the ATO, money transferred from overseas retirement savings is considered to be a contribution and is therefore subject to the regulations around non-concessional contributions.
As the ATO points out, fund-capped contribution limits generally apply. If you’re between 65 and 75 years of age, the maximum you can transfer from your overseas scheme is the same as the non-concessional contributions cap for the current financial year. If you’re younger than 65, the limit is three times the non-concessional contributions cap. According to the ATO, for the 2017-18 financial year, the cap is $100,000, meaning if you’re 65 or older, you can potentially bring in up to $100,000 from your foreign savings. If you’re under 65, you can potentially bring in up to $300,000 if you’re eligible to use the bring-forward provisions. Any amount over the relevant cap is generally transferred back to your overseas fund.
How will it be taxed?
It’s important to speak with a tax specialist both in Australia and the country you want to transfer your savings from to be sure about any tax treatment. You can also find some information on the ATO website. According to the ATO, super lump sums transferred from overseas super funds into Australian super funds are taxed in Australia at varying rates depending upon:
- when the transfer is received in Australia (before or after six months of becoming an Australian resident for tax purposes)
- your choice about whether you or your super fund pays the tax on the ‘applicable fund earnings’
- your non-concessional contributions cap
- your age in the financial year the transfer occurs
- whether special rules (such as the Trans Tasman retirement portability scheme) apply
The date that you became an Australian resident matters quite a lot for any tax liability levied on your transferred savings. According to the ATO, the assessable amount of a super lump sum from a foreign super fund transferred directly to an Australian super fund is referred to as “applicable fund earnings” (AFE). The AFE is essentially the growth in the foreign super fund between the time you became an Australian resident for tax purposes, and when the lump sum is paid into your super fund. The ATO advises that if you transfer your savings within six months of becoming an Australian tax resident, any AFE will usually not be assessable which means you won’t incur a tax liability on any growth. If the transfer takes longer than six months, there will usually be tax to pay.
If your super fund receives a super lump sum directly from a foreign super fund, the ATO advises that you can choose to have some or all of the assessable part of the lump sum treated as assessable income of your fund. In other words, it’s your choice whether you pay the tax liability on the AFE yourself at your marginal tax rate, have your Australian super fund pay it at a rate of 15%, or any mix of the two. Once the choice is made, you can’t revoke or vary it. Subject to any earlier time limit set by your super fund, you can make this choice:
- up until the day you lodge your income tax return for the year of transfer or
- the day you would have been required to lodge one if you don’t need to lodge a tax return.
You need to complete and submit the relevant form to your super fund to inform them on your choice, and according to the ATO, your fund will pay tax on the relevant amount at the concessional fund tax rate of 15%.
It’s also a good idea to contact your super fund and to seek independent financial and taxation advice.
If you’re comparing Superannuation funds, the comparison table below displays some of the products currently available on Canstar’s database for someone aged 30-39 with a balance of up to $55,000, sorted by Star Rating (highest to lowest), followed by company name (alphabetical). Use Canstar’s superannuation comparison selector to view a wider range of super funds.
Fee, performance and asset allocation information shown in the table above have been determined according to the investment profile in the Canstar Superannuation Star Ratings methodology that matches the age group you selected.