Bringing your foreign super with you

Moving foreign super |  How do I pay the tax on AFEs?

Australia attracts people from all over the world, and some are older individuals hoping to move closer to (or, in some cases, further away from) their families. And with these greying globe-trotters may come superannuation funds.

It's not at all uncommon for people to move their money from foreign funds into the Australian super system. After all, it's your money; you have worked hard for it, so of course you should be able to bring it along with you. Whether or not you decide to do so is a very individual choice.

• you have a six-month 'window' in which you can transfer your fund tax free
• if you do not transfer your fund then any increase in the value of the fund since you became a resident for tax purposes, will be subject to tax at a special rate of 15% calculated in Australian dollars
• most foreign pensions and annuities are taxable in Australia, even if tax was withheld from your super by the country from which the super came
• how you are taxed within Australia revolves around whether you are a resident or non-resident for tax purposes, as well as your normal contribution thresholds.

NOTE: Moving money around can be tricky – it's best to seek out a financial adviser for how best to navigate the system.

Bear in mind also that there may be taxes or charges relating to moving away from your overseas fund, so check with your fund to find out how much you might be charged.

Moving foreign super
First things first, do you have a tax file number (TFN)? If not, find out how to get one here. Your Australian super fund will need your TFN before it can accept any overseas super benefits. Once that's sorted out, you will need to find out if your overseas super fund can be paid directly into your chosen complying Australian superannuation fund. You do this by discussing this with the Australian fund.

When it has received the funds, the Australian super fund calculates if the foreign fund earned any income for you while you have been a resident of Australia. This is called the assessable amount, or applicable fund earnings (AFEs). Note that the assessable amount is dependent upon whether you were an Australian resident for tax purposes at all times during the period to which the lump sum relates.

How do I pay the tax on AFEs?
If it is determined that you have an assessable amount, you are able to choose to pay between zero and 100% of the tax yourself, from your own money at a marginal rate. Whatever tax you choose not to personally pay, your super fund will pay at a concessional tax rate of 15%.

Apart from the assessable part of your super fund, lump sums from foreign super funds are generally tax-free if a complying Australian super fund receives them within six months of you becoming an Australian resident or terminating foreign employment.

The following example is provided by the Tax Office

A taxpayer has $100,000 in a foreign super fund which is paid directly to an Australian super fund. Assume that the assessable amount of the payment is $20,000. The taxpayer may choose to have $20,000 treated as assessable income of the Australian super fund. The Australian super fund will include the $20,000 in its assessable income and the amount to be included in the taxpayer's assessable income will be reduced to zero.

When a foreign super fund conducts a payment to another foreign super fund, no tax is payable by you as an Australian resident taxpayer at the time that the payment occurs. When the benefit is dealt with, that is eventually paid out to you or to another Australian super fund, that is when tax will be paid.

If you choose for the lump sum to be paid to you, or another person on your behalf rather than into an Australian super fund, then part of the payment deemed assessable will be included in your assessable income and taxed at your marginal rate. The non-assessable part will count towards your non-concessional contributions cap.

Last reviewed 9/08/2012

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