Transfer from a foreign super fund to an Australian super fund

Overview

Money you transfer from a foreign super fund to a complying Australian super fund may:

• count towards you super contributions caps, and be subject to additional tax if you exceed the caps
• be subject to Australian income tax
• be subject to rules and tax in the foreign country.

Certain conditions must be met before your complying Australian super fund can accept a transfer from your foreign super fund.

Transfers between Australian super funds and New Zealand KiwiSaver schemes are treated differently under the Trans-Tasman Retirement Savings Portability scheme.

Transfers from foreign super funds are member contributions

A transfer from a foreign super fund to a complying Australian super fund is treated as a member contribution.

Transfers from foreign super funds are subject to the same restrictions and limits that apply to contributions generally. To understand how they are treated as concessional or non-concessional contributions, see How your Australian fund reports a foreign transfer.

Your Australian super fund must have your TFN

An Australian super fund cannot accept a transfer from a foreign fund unless they have your tax file number (TFN), or you give it to them within 30 days of the transfer. If your Australian super fund doesn’t have your TFN within 30 days of the transfer they must return the whole amount to your foreign fund.

Australian tax is paid on applicable fund earnings

You (or your Australian super fund) must pay income tax on the part of a foreign fund transfer that is applicable fund earnings.

The applicable fund earnings are the earnings on your foreign super interest that have accrued since you became an Australian resident for tax purposes. ‘Super interest’ is any amount, benefit or entitlement a member holds in a fund.

How the applicable fund earnings are calculated depends on whether you were an Australian resident at all times during the period to which the lump sum relates. The way to calculate your applicable fund earnings is set out at section 305-75 of the Income Tax Assessment Act 1997.

You can request a private ruling to determine how much of a transfer is applicable fund earnings.

The 6-month rule

None of your foreign super interest is treated as applicable fund earnings if you transfer it to Australia within six months of either:

• becoming an Australian resident for tax purposes
• your foreign employment ceasing.

Including applicable fund earnings in your fund’s assessable income

You may be able to choose to include some amount of your applicable fund earnings in your fund’s assessable income. In this case, the amount will be taxed in your fund instead of as part of your income. Your fund pays income tax at 15%, which may be less than the rate of tax you pay.

To make a choice, you must meet all of the following conditions:

• you have been an Australian resident for tax purposes for more than 6 months or have terminated your employment more than 6 months ago
• you have transferred the whole of the foreign fund interest directly to a complying Australian super fund
• you no longer have a super interest in the foreign fund.

If you don’t meet these conditions you can’t choose to include any amount in your fund’s assessable income. Instead, you must include any applicable fund earnings in your personal assessable income.

You make this choice on the Completing your choice to have your Australian fund pay tax on a foreign super transfer form.

How your Australian fund reports a foreign transfer

When you transfer an amount from your foreign super fund to your Australian super fund, your Australian fund will report the transfer as a contribution for you for the year. It will be counted as either, or a combination of:

• a non-assessable foreign fund amount, which is counted towards your non-concessional contributions
• an assessable foreign fund amount, which is counted towards your concessional contributions.

If you choose to include some of your applicable fund earnings in your fund’s assessable income, the amount will be reported as part of your total contributions (increasing your total superannuation balance) but doesn’t count towards your contributions caps.

Non-assessable foreign fund amount

Generally, most of a transfer from a foreign fund will consist of contributions you have made to the foreign fund and the earnings on those contributions.

The non-assessable amount is the amount that was vested (paid to you or for which you’re entitled by law) at the time of the transfer. This will include earnings on your contributions from the foreign fund even if the earnings were not allocated to you at the time of the transfer.

Applicable fund earnings are included in the non-assessable foreign fund amount, less any amount you choose to include in the fund’s assessable income. This amount is no longer treated as a contribution but treated like normal earnings of your fund.

Assessable foreign fund amount

Any amount of a foreign fund transfer that exceeds the amount that was vested in you at the time of transfer is included in the fund’s assessable income.

For more information see Tax treatment of transfers from foreign super funds.

Transfers from United Kingdom funds

United Kingdom (UK) funds must comply with the requirements of His Majesty’s Revenue and Customs (HMRC). The HMRC website has information about transferring amounts from UK funds to non-UK funds, including Australian super funds or residents.

For more information:

• see gov.uk Workplace and personal pensions – search for ‘Transferring your pension’, ‘List of recognised overseas pension schemes (ROPS)’
• see Pension schemes newsletter 36 – National Archives, UK
• contact your Australian super fund for further details.

Tax treatment and rules that apply to transfers from a foreign super fund to an Australian super fund.

Source: ato.gov.au August 2023

Reproduced with the permission of the Australian Tax Office. This article was originally published on https://www.ato.gov.au/individuals-and-families/super-for-individuals-and-families/super/foreign-super-funds/transfer-from-a-foreign-super-fund-to-an-australian-super-fund.

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