Australia Limits Incoming UK Pension Transfers

Australia Limits Incoming UK Pension Transfers.

The Australian Budget was passed on 3rd May.  Within it was a substantial review and of tax and superannuation pensions with limits and caps introduced. See: http://www.budget.gov.au/

The nitty gritty:

AU$25,000 maximum annual superannuation contributions that receive tax concessions i.e. tax relieved

AU$250,000 limit for combined annual earnings and superannuation contributions with tax payable above this level at a higher 30% rate

AU$1,600,000 lifetime allowance limit meaning that a maximum of AU$1.6m of superannuation funds can be used as a retirement account and drawdown tax free, any excess will be taxable

AU$500,000 lifetime limit on non-concessional superannuation contributions i.e. contributions paid in that did not receive tax concessions i.e. you pay in from net income

The key line here affecting British Expats in Australia and Australians living and working in the UK, both with a view to transferring UK pensions back to Australia is the last entry for AU$500,000 lifetime limit on non-concessional superannuation contributions.  These limits will be index linked but what it really means overnight is you are restricted in the amount of UK pension funds you can transfer into Australia.  UK Pension funds of course were not built up in Australia and therefore are non-concessional superannuation contributions when transferred from UK to Australia.

What this means for you in the UK?

It means that if you have built up large UK pension funds, you will be limited on how much you can transfer to Australia.  Any balance with either need to remain in UK retirement schemes or transferred to offshore QROPS/QNUPS schemes outside Australia.

Why have they done this?

The attraction of superannuation is that from age 60, you can draw retirement benefits tax free (up to the new AU$1,600,000 lifetime allowance limit) as well as estate planning benefits.  Just like the UK, Australia is now penalising those who have large pension funds and also restricting the amount of tax relief higher earners can secure.  Backdoor austerity.