Superannuation when Retiring Overseas
Almost without exception we believe that any Australians either retiring overseas, or likely to be considered tax resident in another country, should seek financial advice before proceeding overseas. Consider the following issues:
Access to Superannuation
"Many years ago" it was possible to fully access your superannuation as a lump sum, prior to meeting the normal access conditions, if it was your intention to move overseas on a "permanent basis". That flexibility no longer exists and there is no provision to simply transfer your super overseas, except with the narrow exception of transfers to New Zealand and into KiwiSaver accounts.
Therefore, in terms of accessing superannuation, you need to meet the same access conditions as any individual resident in Australia - which normally means having reached your preservation age and meeting a condition of release, or eligibility for a transition to retirement pension.
Taxation of Superannuation
While superannuation income or lump-sum payments might be tax-exempt in Australia for most individuals aged 60 plus, that may not be the case in the country in which you are resident overseas. Depending on the country in which you are resident, there may be a double taxation agreement between Australia and your country of residence which determines taxing rights, the country may not levy any tax on your income at all or you may be subject to full marginal tax, with or without allowance for part of the payments constituting a return of capital. Some countries may levy a wealth tax on your superannuation balance and others may seek to tax your superannuation earnings even before you begin to draw on your fund.
Additionally, should you draw a pension from an untaxed superannuation fund, and these are largely limited to Government, public sector funds, then you may be taxed on your pension on a non-resident basis in Australia should you retire overseas. Non-resident tax rates are higher than residents tax rates because there is no tax free alowance. That tax may, or may not, be available as a tax offset in the country of residency.
This is why we regard it as essential that you seek tax advice regarding treatment of your superannuation in both Australia and your new country of residency before proceeding overseas. In some circumstances, if you are absolutely certain that you wish to leave Australia on a permanent basis, it may be more tax efficient for you to withdraw your entire superannuation in Australia and reinvest it tax effectively in your new country of residency - this may apply to individuals and couples seeking to retire in the UK. This approach may also have the advantage of reducing your foreign currency exposure - with your assets now in the currency of your expenses.
If you would like to arrange professional advice in relation to the above matters, please complete the Inquiry form below providing details and you will be contacted accordingly. You will receive a fee quotation in advance of any advice or services being provided.