UK Tax on Australian Superannuation

Hi,
 

If you are unsure whether your payments are classed as lump sums or not and the guidance provided here does not clarify then you would need to send in the paperwork to ourselves so we could review this further. The term lump sum is not legally defined and so we can only interpret the meaning and following discussions with the Tax Treaty Team, we have adapted our understanding: A lump sum should be a payment that is not a periodic payment. This may not empty the pot, and a taxpayer may have more than one lump sum payment. Example – If a taxpayer receives monthly pension payments and then takes out a larger payment as a one off from the same pension pot, whilst continuing with regular monthly pension payments, then this one-off larger payment can be considered a lump sum as it is not a regular periodic payment. However, if a taxpayer has a pension fund which only requires an annual distribution of a certain percentage (eg 4% payment annually)to be made, then even though this is only once a year, it should be considered a pension as it is their periodic pension. If the payment is a periodic payment, then this would only be taxable in the UK. The 25% rule applies to UK pensions.

Thank you.

So are you saying from the above that irregular withdrawals taken as lump sums from a Australian fund are not taxable in the uk?

Hi,

As a UK resident all income from abroad is subject to UK tax unless there is a specific clause in the tax treaty to exempt this.

Please see the Australia tax treaty here:

UK/ AUSTRALIA DOUBLE TAXATION CONVENTION

DT2650PP - Double Taxation Relief Manual: Guidance by country: Australia: Contents

Thank you.

Dear HMRC, To put my question “up front”: Given HMRC’s “adapted” understanding of “lump sums”, how will non-periodic lump sum payments from Australian superannuation be treated for tax purposes in the UK if the recipient is tax resident in the UK? On the issue of UK taxation of Australian superannuation: I understand the UK tax treatment of regular periodic income from Australian pensions paid to someone who is tax resident in the UK, including those from Australian superannuation. Article 17 of the Australia-UK Double Taxation Convention is very clear – the regular pension payments are taxable only in the UK, even if they are from government service. I comprehend the “adapted understanding” of lump sums HMRC Admin 17 posted “4 days ago” on the Community Forum “UK Tax on Australian Superannuation”. It seems reasonable to infer that, given you have identified them separately, you will tax lump sums differently from regular pension payments. This would be consistent with some of the advice your representatives have posted earlier (see summary at the end). What is still not clear is how these lump sums will be treated for tax purposes in the UK if the recipient is tax resident in the UK. Looking back over comments made by various HMRC representatives on lump sums from Australian superannuation, the position seems to have changed or could be viewed as being contradictory. (As a comment, for people who are not international tax professionals, when steering someone to Double Tax Conventions or HMRC Guidance, it might be helpful to quote the part that is relevant, particularly where a document has no specific reference to the subject in question. I would make the same comment if you are steering a person to a document to show there is no exemption, i.e. state that there is no exemption in the Convention so the income will be taxable in the UK and, to be even more helpful, state how it will be taxed in the UK.) A history of HMRC inputs to the Community Forum relevant to lump sums is: “Two years ago”. HMRC Admin 3 stated “Where a lump sum payment is taken out this would be taxable only in Australia. If a pension was taken instead and monthly amounts paid, this would then be taxable only in the UK as a UK resident.” “About a year ago” HMRC Admin 8 posted: “This would be declared as an overseas lump sum pension payment and foreign tax credit can be claimed on the amount of tax already paid.” “10 months ago” HMRC Admin 17 posted: “Regular pension payments from an Australian fund would be subject to UK income tax only. Lump sum payments would be subject to UK tax but also possibly Australian tax. In this case the UK will give Foreign Tax Credit Relief for tax already paid so tax is not paid twice on the same income.” “5 months ago” HMRC Admin 26 posted a reply indicating treatment as a “Trivial Commutation Lump Sum” “4 months ago” HMRC Admin 20 posted: “However clarification is currently being sought for a definition of a lump sum.” “4 months ago” HMRC Admin 19 posted: “As mentioned previously if you take your Australian pension then under article 17 of the double taxation agreement the UK can tax this. If the pension you take is classed as a Trivial Commutation Lump Sum then Australia have the right to tax it and it will not be taxed in the UK.” “Two months ago” someone identified as “Tom-M” made a post that actually looks like it came from HMRC, as it is addressed to a Tom-M and contains text similar to that posted 4 days ago by HMRC Admin 17. “About a month ago” HMRC Admin 24 posted: “If the lump sum has been paid during a period of non residence then this would not need to be reported for income tax purposes to the UK. “4 days ago” HMRC Admin 17 posted information about an “adapted” understanding of lump sums developed in consultation with HMRC’s Tax Treaty Team. However, this did not clearly state how lump sums from Australian superannuation would be taxed in the UK. In addition to this history of specific lump sum comments, “3 days ago” HMRC Admin 19 posted information that could be interpreted that, given superannuation lump sums are not specifically exempted in the Australia-UK Double Taxation Convention, they are taxed in the UK. It would be useful if this were unambiguously stated though. (From what I can see, neither the Double Taxation Convention, nor the Country-Specific Guidance in the Double Taxation Relief Manual to which you have created links, specifically mention lump sums or Australian superannuation. The only instance of “superannuation” that I can see relates to Australian income of UK superannuation funds.) Best Regards

Hi Michael Abbott,

If you are still unsure if your payment is classed as a lump sum or not then you will need to send in your paperwork to ourselves for us to review as each case is dealt with on an individual basis.
In general terms, Australian lump sums taken by UK residents are taxable in the UK, with Australia potentially taxing as well. This would then lead to Foreign tax credit relief being claimed. 

Thank you.

Dear HMRC, My partner's father passed away about a year ago. He had an Australian superannuation (being of joint Australian/UK nationality) and made arrangements for the fund to be divided between his three (grown up) children. This is being dealt with in Australia and tax advice is being given by an appropriate Australian accountancy firm. The question I have is how this would be treated in the UK once the monies are repatriated? Would it be deemed as 'income' for each of the three beneficiaries, or would it be classed as being a distribution of their fathers estate and be subject to inheritance tax rules? Aside from this, everything else in the estate has been passed on to the fathers surviving spouse. Any guidance would be appreciated. Best Regards

Hi,
 

If the individuals now have ownership of the pension as a lump sum or an ongoing monthly payment for e.g. then we would expect this to be declared as being in receipt from an overseas pension, which should be declared on a Self Assessment tax Return under the Foreign section.

Thank you.

Hi, I am a dual Australian and UK Citizen. I returned from Australia in 2019 after being there for 20 years. I had a joint Self Managed Superannuation Fund (SMSF) with my husband who unfortunately died aged 45 years in 2014. The SMSF was divided in two with one half apportioned to myself and the other half divided between myself and my 2 dependent children. The SMSF has a number of investments which provide regular monthly or three monthly payments which as taxed by the ATO at 15%. My question is if I withdraw regular amounts from my late husband's portion and bring it to the UK at what rate of tax will it be taxed? Will the 15% already taken by the ATO be classed as double taxation? Will the children be able to use there tax free amounts? Many thanks

Hi Helen Flavell,

If you receive a pension in Australia you should declare this on a Self Assessment tax return under Foreign Income.  You can claim a foreign tax credit for the tax you paid on this in Australia.  If your total income in the UK means you pay tax at the basic rate/higher rate then the additional tax will be collected via Self Assessment.

Like adults, children get a personal tax-free allowance, which is how much income they can earn before paying any tax.

Thank you.

A client has drawn down their super annuation and now sits in a bank in Australia and for all intents and purpose acts as savings in his bank. Can this be brought over tax free to the UK

I am a dual UK/Australian National. I have a holiday house in the UK but reside, pay tax and I’m domiciled in Australia. If I spend 4-6 months a year in the UK when retired will I have to pay any UK tax on an Australian Public Service Government annual pension, which is paid fortnightly. If I’m a Non-Dom am I subject to UK tax if I spend more than 90 days in the Uk in any tax year?

The West Australian Government has it's own Superannuation fund GESB,wa,gov,au. Only West Australians who work for the West Australian Government are allowed to join this fund. On reading the tax laws on pensions I notice that government pensions are not taxed? Consequently as I now have an allocated pension from this fund do I need to pay tax as these pensions are paid into an Australian bank along with a part UK age pension? Owning a house along with all the costs in Australia and having my family in Australia can I be considered as a domicile of Australia even having spent over 183 days in the UK and consequently now being a resident for the tax year in the UK. Your advice will be appreciated.

Hi
 

Neil Sanderson,   You are required to declare your overseas income to HMRC unless all of the following circumstances apply: (a) your only foreign income is dividends (b) your total dividends - including UK dividends - are less than the £2,000 dividend allowance and  (c) you have no other income to report.            See Link: Check if you need to send a Self Assessment tax return  . Thank you.

Hi Laura Smith


The transfer of money from an overseas bank account to a UK tax account is not in itself a taxable transaction.

Please note, however, that if your client was a resident of the UK when the Australian pension was drawn down, he would have to declare the lump sum as foreign income.

Under those circumstances, your client could of course claim Foreign Tax Credit Relief re: any Australian tax deducted.

Thankyou.

Regards.

Hi Jeffrey Rowland

Please see Residency Test to determine your tax residency :

Statutory Residence Test (SRT)

Please also see Article 17 which states the taxation rules around Australian Govt pensions:

UK/ AUSTRALIA DOUBLE TAXATION CONVENTION

Thankyou.

Regards.

Hi, In regards to your second link "UK?Australia Double Taxation Convention, when trying to open it appears as "Status not found" any suggestions ? Thank you Regards

Hi,
 

Select the link that states Tax Treaty 2003  : Australia: tax treaties    . Thank you.

   

Hi, So my uncle is looking to transfer/ release funds from his Superannuation from Australia. My understanding of Australian Super legislation is that it does not allow transfers to overseas schemes (other than New Zealand in limited circumstances)? Is it possible to withdraw the savings as a one-off payment? If so where is tax paid? In Aus or UK If taken as income, does the tax only apply in the UK and there will be risk on the exchange rate and UK income tax to pay? He wants to know the best way to drawdown on these funds.

I am a dual Australian/British citizen. I lived and worked in Australia for many years and contributed to an Australian superannuation fund while there. In 2013 I closed a UK pension fund I had and transferred the money (Sum X) to my Australian super fund, planning to retire there. Under Australian tax law, I am able to withdraw part or all of my Australian super tax-free. However, in 2016, for unexpected family health reasons, I returned to live in the UK and I will now retire here. I would now like to withdraw and transfer a lump sum from my Australian super to the UK. Please can you confirm if: I can withdraw 25% of my total Australian super (including 'Sum X') as a lump sum tax-free in the UK? or: I can only withdraw 25% of the 'Sum X' as a lump sum tax-free in the UK? Thank you.

Hi
 

Nigel Hardiman ,   Please refer to guidance at : Foreign pension schemes    .

Thank you.