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Re: TAX FREE UK PENSION LUMP SUM

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Hello

I am a dual UK/Australian citizen, resident for 8 years in Australia.  I had a career in the UK with a bank and as such I have a final salary pension plan, known now as a defined benefit pension.  I can draw this anytime from age of 55 to 60.  I understand that I would pay tax on the income, HOWEVER, a feature and incentive of his plan to save into iover many years is that upon retirement( drawing the pension) I can opt to take a smaller pension and have a TAX FREE lump sum.  My question is whether this is also considered tax free in Australia?

 

It woud seem unreasonable to pay tax on this, BUT...........

Thanks

Keith

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Former Community Support

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Hi @Rosemary7,

 

Welcome to our Community!

 

We can provide general information here on tax and super topics, however we'd need to know more information relating to your personal circumstances to work out how your UK pension will be treated for tax purposes in Australia.

 

Generally speaking, if you're an Australian resident and received income from overseas, you must show your assessable foreign income in your Australian tax return. Most foreign pensions and annuities are taxable in Australia, even if tax was withheld from your payment in the UK. However, depending on the type of pension or annuity you may be able to claim a foreign income tax offset if:

  • the country from which your foreign pension or annuity came withheld tax from your payment
  • you were not entitled to seek a refund of the foreign tax from that country, and
  • the foreign pension or annuity is also taxable in Australia.

If you have the full details of your pension you can contact our superannuation area to speak with an operator. We may be able to advise you the full details over the phone.

 

Thanks.

35 REPLIES 35

Most helpful response

ATO Certified Response

Former Community Support

Replies 30

Hi @Rosemary7,

 

Welcome to our Community!

 

We can provide general information here on tax and super topics, however we'd need to know more information relating to your personal circumstances to work out how your UK pension will be treated for tax purposes in Australia.

 

Generally speaking, if you're an Australian resident and received income from overseas, you must show your assessable foreign income in your Australian tax return. Most foreign pensions and annuities are taxable in Australia, even if tax was withheld from your payment in the UK. However, depending on the type of pension or annuity you may be able to claim a foreign income tax offset if:

  • the country from which your foreign pension or annuity came withheld tax from your payment
  • you were not entitled to seek a refund of the foreign tax from that country, and
  • the foreign pension or annuity is also taxable in Australia.

If you have the full details of your pension you can contact our superannuation area to speak with an operator. We may be able to advise you the full details over the phone.

 

Thanks.

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Replies 29

Thank you Jodie for your reply and I will phone in and seek advice. My query was less about a payment in the UK with withholding tax, rather a feature of UK defined benefit pensions is that you can draw up to 25% as a lump sum after the age of 55 Tax free and it is this I was wondering if it would be tax free in Australia?

Newbie

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Hi kmeijer1

Looking at the answer from JodieH, I think given it's tax free in the UK there will be no withheld tax, no credit and therefore fully taxable in Australia. 
I'm in the same situation and would love to hear more if you find anything out. It seems very unfair. 
Eleln

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Replies 27

The ATO site doesn't seem to explain which pension lump sum payments are taxable and which are exempt. The instructions are :

"If you received a lump sum payment from a foreign superannuation fund, phone 13 10 20. Some of these payments are taxable and some are exempt from Australian tax."

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Replies 26

Hi Ellen

 

A financial advisior who specialising in UK/Australia tax has said the following to me:

 

"Yes any foreign superannuation lump sum is assessed for tax here in Australia regardless of it being tax-free in the UK.

I understand that if the lump sum is taken with the remaining pot subsequently providing an income for life then it is just the lump sum amount that is assessed as opposed to the whole pot.

The assessment is based on the growth of that lump sum typically between date of residence and receipt of lump sum.

Have you considered a transfer of the pension to an Australia QROPS Super?

Withdrawals from Australian Super tend to be more tax efficient and offer more flexibility"

 

This would suggest that if I get my pension company to quote the the tax free lump sum they would have quoted when I became a resident in Australia in 2013, then this is a base value  if I choose to take this lump sum now of in the future and the tax payble is on the increase in value of the same.

 

Appreciate if ATO community would comment or even concur in principle.

 

Thanks for this forum.

 

Newbie

Replies 25

Hi 
I believe that's true- only the gowth since residence is taxable. 
I'm looking for confirmation as to how that can be calculated. Sounds like it won't be too much for you as you've not been here long Smiley Happy
Regards
Ellen

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Hi

Thanks.  I was also trying to understandthat I was not 55 when I became a resident, however my Defined benefit pension gave a gurenteed projection, the value of which has remained virtually the same. so has it increased at all....or as I could not draw it at the time .....

Newbie

Replies 23

Hi, has anyone received any definitive information regarding the taxation of a lump sum from a UK pension? I understand I must pay tax on the income but the actual calculation to establish what amount to enter on my tax form seems impossible to verify. I too was under 55 when I entered Australia and am not sure if this has any bearing on the situation. A tax accountant has calculated the figure but it doesn’t seem right if the basis of the calculation is the increase in the fund from entering Australia to taking the lump sum. I have tried to speak to someone st the ATO but after an hour of being passed from pillar to post I gave up from sheer frustration. I work full time so it is difficult to phone again. Any suggestions or assistance would be appreciated

ATO Community Support

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Hi @ Dbougourd,

 

We've provided a response on your other post.

 

Thanks, NicM.