The Australian tax information below is of a general nature only. Professional advice should be sought prior to establishing an InterRetire Plan.
InterRetire has a ruling from the Australian Taxation Office 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.
Benefits withdrawn as a lump sum from a foreign superannuation fund by an Australian resident taxpayer may be liable to Australian tax under Division 305of Income and Tax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.
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.
What are your options?
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$300,000 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 [email protected] for specific tax information and referrals to the major accounting firms specialising in the area of international retirement plans.
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 [email protected] for more details