Australian pension tax-free in UK?

[Tamarama]

I lived and worked in Australia for 20 years and have a substantial pension there.

Since the new rules about tax on superannuation in Australia came in last year, this pension can now be taken completely free of tax (I have just reached the tax-free qualifying age of 60).

Please could you tell me if there any way in which I can continue to live in the UK and receive the income from the pension tax-free. Or do I have to return to live in Australia to do this? Or could I spend a certain amount of time in Australia each year and qualify as a person who does not pay UK tax on the pension? (I have dual citizenship, so can move freely between the UK and Australia and live in either country).I have been living in the UK again, and paying UK income tax, since 2004.

Please help me to decide where I should live next -- if I have to pay 40% of my pension to HMRC, then it looks as if I'll be going back!

[JSK TAXATION]

Tamarama,

The UK / Australia double tax treaty states at Article 17 (Pensions and annuities) that the determining factor of where a pension payable by one of the countries is taxed is the residence of the recipient.

If you are resident in the UK, then the pension is taxable here.

Kind regards,

John S King
Chartered Tax Adviser
www.taxation-advice.com

[TaxationWeb@BritishA]

I suggest you seek out a good UK accountant specializing in offshore taxation, who can help you set up your affairs in such a way that you will either (a) be taxed as an Australian resident or (b) arrange for the tax benefits of nondomiciliary, if you are eligible for these. Tax planning requires a fair amount of give-and-take in the conversation, to ascertain what your values are and where you are willing to make sacrifices.

[JSK TAXATION]

Tamarama,

I am not sure what the points raised by BAT.com are meant to suggest.

Your question is clear i.e. how can you receive the pension in the UK tax free. Please note this can only be achieved if you are non-UK resident.

Your domicile status is irrelevant. It only becomes relevant if you remain UK resident but are not interested in bringing the income into the UK!!

Over to you BAT?

Kind regards. John

[mkp]

Dear Tamarama
If your Australian Superannuation Fund allows you to receive 100% of your benefit as a lump sum, then you make be able to do so tax free in Australia and also the UK, under extra statutory concession 10, (but only as a lump sum and dependant on certain conditions).
However, if you plan to eventually retire in Australia (and cease to be UK tax resident), then it may be best not to draw anything from the Australian scheme until you have left the UK permanently.
Hope this helps
Cheers
mkp

[tax me less!]

To summarise:

1. The treaty states that most pension income is taxable in the country of residence.

2. If you take a lump sum from your super (an unlikely option) you may find under ESCA10 that it could be UK income tax free in the UK. You would instead probably be subject to UK unauthorised payment charges.

3. Assuming you are domiciled here, the UK would tax 90% of the pension.

4. If you return to live in Australia you may get a larger percentage tax-free.

5. You could transfer the super to a UK personal plan & then reduce UK tax by taking 25% tax-free in the UK.

[mkp]

Hi tax me less!
Do you think unauthorised payment charges apply to non-UK tax relieved monies?
Australia allows 100% of one's super fund to be encashed as a lump sum but does not permit overseas transfers.
Regards
mkp

[maxandpaddy]

Australian super is allowed to be withdrawn tax free but lets not forget it has been taxed on the way in (albeit at a concessional 15%).

Ao effectively tax has been paid on it in Austalian under Australian tax laws.

Given the double taxation treaty that is in place shouldn't the HMRC view it has having been taxed already.

Has anyone sought an opinion from them on this matter?

[Quokka]

I am also an Australian resident planning to retire in UK, although a few years to go yet. I have been researching the issue of tax on super and it appears from Clause 10.9 of HMRC6 (link below) that a lump sum payout would be tax free.

http://www.hmrc.gov.uk/cnr/hmrc6.pdf

Any more learned opinions on this would be most welcome.