Accounting, SMSF, Superannuation, Tax

Timeframe limits foreign transfers

Foreign superannuation fund Lump sum payment Timeframe SMSF Superannuation rules

The Australian superannuation rules make lump sums paid from overseas pension schemes attractive but perhaps unachievable.

Individuals looking to take advantage of the tax treatment applied to a lump sum payment from a foreign super fund must acknowledge the practical timeline often involved with the process, the director of an accounting firm has said.

“If it’s a foreign super fund [involved] and a lump sum payment [is made] to the individual within six months of the date of residency, or [the amount] might get transferred to a super fund in Australia [also] within six months of residency, then there is no tax payable on that transfer,” Cooper Partners head of SMSF and succession Jemma Sanderson noted.

“So that is a really, really good outcome.”

However, Sanderson pointed out advisers and their SMSF clients must be conscious of the transfer process as to whether or not it will satisfy the required six-month deadline from the original date of Australian residency.

“In my experience in dealing with the international schemes, to try and accomplish a payment within six months – it’s a real challenge,” she revealed.

“They’re used to their own rules on their jurisdictions and dealing with their own residents. So having to deal with a non-resident and how that interacts with double tax agreements and [such] things and how that flows through, [makes] trying to achieve something like this within that six-month timeframe is a real challenge.”

To this end, she shared a situation she recently experienced in regard to this type of action.

“We had been dealing with a UK adviser on getting some money into Australia and it took them 12 months just to get an authority on the file with the defined benefit scheme in the UK [allowing] them to actually even [access] information from that scheme – 12 months,” she said.

“[It’s] because they wouldn’t respond to emails, they don’t have a phone number you can call to speak to a real person, so there are real challenges with trying to accomplish these things within the timeframes.”

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