If you wish to set up an international retirement plan for your employees, please contact InterRetire.
Alternatively, InterRetire can provide a referral to professional advisors through out the world, familiar with the InterRetire Employer Retirement Plan.
An international InterRetire Employer Plan can be set up for one key senior international executive or for employers with a workforce in multiple countries.
Australia International Tax Planning
The Australian tax information below is of a general nature only. Professional advice should be sought prior to investing in the InterRetire Trust.
- Tax treatment of a Non-resident Superannuation Fund
- Employer Sponsored Superannuation Fund
- 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
Tax treatment of a Non-resident Superannuation Fund
Foreign Investment Funds (“FIF”)
The Australian tax legislation contains rules requiring an Australian resident individual to disclose investment earnings accumulating in a “Foreign Investment Fund” (an interest in a foreign company or foreign trust, but excluding any controlled entity as these are dealt with under separate provisions).
Where an individual is an investor in a FIF, subject to available exemptions, the annual growth in the investment must be declared in the individual’s Australian tax return. Membership of a foreign retirement benefits fund is classed as a FIF, but an exemption is granted in relation to amounts held in a foreign Employer Sponsored Superannuation Fund.
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Employer Sponsored Superannuation Fund
This is defined as a fund that is “a superannuation fund maintained by an employer, or by an associate of the employer, for the benefit of employees” which specifically includes former employees. However, very little guidance is given as to how this phrase is to be interpreted. Based on the manner in which funds are established within Australia, in our opinion, several steps can be taken to lend weight to any argument that a fund would fulfil the characteristics of an employer sponsored superannuation fund:
- The fund should be established with a primary purpose of providing retirement benefits to employees of the employer. Benefits should be preserved until a selected retirement age or death/permanent disablement and early withdrawal to the member should only be permitted in cases of hardship
- The fund should be established by the employer – the employer should be a party to the documents establishing the fund and contribute for each employee
- Regular employer contributions should be made, but this need not preclude personal contributions or transfers from an existing fund
- Transfers of benefits out of the fund should only be permitted if made to another fund whose primary purpose is also to provide retirement benefits.
It should be noted that no Australian tax deduction is available for corporate or individual contributions to a non-resident superannuation fund. Further, Fringe Benefits Tax may apply on employer contributions.
TopWithdrawal of Benefits from a Non-resident Superannuation Fund
Benefits withdrawn as a lump sum from a foreign superannuation fund by an Australian resident taxpayer, may be liable to Australian tax under section 27CAA of Income and Tax Assessment act 1936.
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.
Note that if any benefits in a foreign fund have been attributed and assessed on the individual under the FIF rules (see above), a credit is granted in relation to the amounts attributed against the lump sum or pension income derived from the same fund.
TopTransfer of benefits to an Australian fund
The transfer of benefits from an eligible overseas fund to an Australian complying fund may also give rise to an assessable amount under section 27CAA. However, by making an appropriate election, 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 effected 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.
TopRetirement Options if you are planning on permanently returning to Australia
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$450,000 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 via enquiries@interretire.com for specific tax information and referrals to the major accounting firms specialising in the area of international retirement plans.
Individual Professional Advice
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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