Pension Transfers To Australia

Standard Life has warned that changes in legislation could prove expensive for people who emigrate and intend transferring their pensions to Australia.

Until now, Australian tax legislation has made it profitable for migrants to move their pensions to Australia shortly after arrival.

From 1 July, however, tax legislation will change and Standard Life is advising investors to consider the implications.

For example, if a migrant moves to Australia and leaves cash in a UK personal pension today, tax will be due in Australia on the growth in the fund each year until it is transferred or they started taking benefits. On reaching retirement, all of the income will be taxed as income – as will be the tax-free lump sum. This will not change.

Anyone emigrating before July 1, who is sure the move is permanent, would be advised to transfer their benefits to Australia shortly after emigrating. This strategy will incur little or no tax on the growth and the whole fund can be taken tax-free at retirement.

However, from 1 July, the maximum contribution that can be made to an Australian fund in a tax-efficient manner is around £60,000 a year. This maximum includes transfers.

Andrew Tully, pensions technical manager of Standard Life, said anyone looking to transfer benefits may be best advised to do so before July or phase any transfer over a number of years.

Mr Tully said: “People in the process of emigrating to Australia should take advice and consider carefully whether to transfer their pension benefits overseas.”