What taxes are applicable in Australia on Pension Transfers?

Pensions lump sums can be transferred free of tax into an Australian superannuation fund within six months of an individual becoming an Australian resident. This is a very short timeframe and there will often be occasions where processing and administrative requirements cause the transfer to conclude after the six month deadline. If this happens then the transfer is taxed on the growth in the value of the benefits since the individual became an Australian resident.

As we have mentioned elsewhere in the site, prior to 1 July, 2004 any taxation of the "growth" amount had to be paid by the individual. Now, an individual can elect to have the tax liability paid by the Australian superannuation fund rather than themselves. The tax is 15% and without an election the individual is liable for the tax at the individual’s marginal tax rate.

The amount of any payment which is subject to tax needs to be calculated in a professional basis, preferably by a qualified actuary. The estimation of tax components may or may not be accepted by the ATO as appropriate; depending on the merits of each case.  We have a number of examples where individuals have been in Australia more than a decade before transferring their overseas pension balances - taxes need to be calculated with particular care in these situations.

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