My wife and I became a resident in Australia in September 2012. At that time, my UK personal pension of had a value of $400,000 (all amounts shown at today's FX rate).
Unfortunately, we separated (amicably) and got divorced and agreed a 50%:50% split all of the assets. We applied for, and were granted, a pension sharing order by the UK family court. I
n April 2022, the pension sharing order was completed by the UK Pension company and 50% of the plan was transferred to my Ex-wife's UK pension plan. By this time the plan had increased in value to $815,000, so we both now had pension plans worth $407,500.
Roll forward to today (Sept 2024) and my UK pension is worth $450,000 and I am looking at transferring the plan directly into a qualifying SMSF. I was expecting to be liable for 15% on the increase in the value of my share of the plan from the day I become resident in 2012 through the 10 years to today. i.e 15% of ($450,000-$200,00) = $37,500 tax. Fair enough.
However, it is being suggested that enacting of the court ordered pension sharing order is deemed to be lump sum withdrawal that would be taxable at my marginal rate of tax ie $407,000 x 47%. This would be $191,300 of tax.
I would then still be liable for 15% on the growth of the remaining plan from the date of the Pension Sharing order enactment (i.e 15% x $450,000-$407,500) =$6,375). So nearly $200k of tax. Gulp.
This just doesn't feel right given the UK family court order required the split of one of our matrimonial assets out of my personal pension plan and into my wife's compliant personal pension plan. Neither of us can draw upon the personal pension plans until we are 60 so it's not what I would see as being a withdrawal into cash or the like that should be fully taxed.
Given the large number of British expats here in Australia, I can't help but think that there must be many people who have got divorced since emigrating and formally split their UK pension plans before going on to bring the plan value to a qualifying QROP or qualifying SMSF. However, I have been unable to identify any tax clarification on this matter.
Thank you for your time and assistance.
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