QROPS Technical Issue: Tax On A UK Pension Transfer To Australia

Posted by Simon Harvey on 11/10/09 15:13

UK pension members with large funds, who are migrating to Australia, need to be aware of the possible high tax implications from both the Australian Tax Office (ATO) and UK Her Majesty’s Revenue and Customs (HMRC) should their UK pension transfer to Australia exceed the non-concessional cap.

The amount in a UK pension fund transferring to an Australian superannuation QROPS scheme must not exceed the Australian non-concessional cap of A$150,000 a year. The exception to this is that anyone under the age of 65 can contribute 3 years worth of the annual cap (A$450,000) in one year – providing that no subsequent transfers in or further concessional contributions are made in the following 2 years.

Should the non-concessional limit in an Australian QROPS be breached, as a result of a UK pension transfer to Australia, then the ATO charge the pension member 46.5% tax on the excess.

This chargeable amount is either paid from the scheme directly to the ATO or paid to the scheme member to pass on to the ATO to cover their tax liability. In either event, should this be paid within the QROPS 5-year reporting period, the member would be subject to an HMRC unauthorised payment charge on top of the Australian excess charge.

It is important for UK pension members to receive specialist advice from a firm such as Global QROPS Ltd, prior to migrating to Australia, to ensure they are not subject to unnecessary tax penalties in two countries.