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As Andrew as said you'd be taxed on the £37,500. If you withdrew £50,000 utilising both the 25% tax free and your UK tax free allowance (assuming you don't have any other UK income) then it would be tax free in the UK but you'd be taxed on the full £50,000 in Australia. The following year if your Pension Plan didn't grow at all, then if you took another £12,500 lump sum using your UK tax free allowance then that £12,500 would be tax free in Australia too. If on the other hand your Pension Plan had grown by another £5,000 then £5,000 would be taxable and £7,500 tax free. If, however, you chose to take the 75% as a Pension rather than as additional lump sums then it would normally all be taxable income in Australia (so you lose out on getting anything tax free). You can however apply to get the payments paid tax free from the UK with an NT tax code without needing to worry about the annual allowance. Pay attention to the timing of when you take lump sums. If you take a lump sum in April, only 1/12th of your annual allowance will be available and you'll need to claw back the overpayment at the year-end (you can only get an NT tax code for pensions, not lump sums). Furthermore, the payment will be in the year ended 30th June in Australia and not in the following year, and you'll probably still be waiting for your UK tax refund in June of the following year. I don't know if UK pension funds allow the 25% lump sum to be paid in more than one payment. If they did, getting it paid in two instalments (say one in June and one in July) would offer a tax saving, as of course would waiting until you are retired when you don't have any other income and have a large tax free amount due to SAPTO. If you are still working and paying a high tax rate you might want to consider paying the lump sum into Super where it will be taxed at 15% rather than your marginal tax rate. -
By Andrew from Vista Financial · Posted
Hi Your calculation is broadly correct however there can be in some cases more to it, ie any contributions in/transfers in(out)/withdrawals etc to the Pension since arrival. In relation to the amount of tax that would apply, the growth which is known as Applicable Fund Earnings (AFE) is typically front loaded into withdrawals/transfers out. Generally, this cannot be more than the amount received/transferred therefore in the above example it would be contained to the £37,500 received. In terms of doing anything to make the process more tax efficient....perhaps but there is not enough information to go off and without understanding your personal situation and goals and objectives not really possible to know the suitability of any options however the below could/should be considered: Tax Deductible Contributions to Super (subject to contributions caps and taxable income) Instead a transfer to an Australian Superannuation (QROPS). Regards Andy -
Hi Ozilme23 - same thing is happening to my mom! can you please let me know how did it work out for you?
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