UK rules likely to stop transfers to Aussie super funds
Despite previous suggestions to the contrary, it now seems the prospect of any future UK transfers to Australian superannuation funds, including SMSFs, is unlikely.
Speaking to SMSF Adviser, AMP SMSF’s head of policy, technical and education services, Peter Burgess, said that under UK legislation, transfers to an overseas pension scheme are only permitted if it is a Qualifying Recognised Overseas Pension Scheme (QROPS).
On April 6 this year, several changes were made to the conditions that must be satisfied in order for a scheme to become or remain a QROPS.
To do so, funds must satisfy the UK’s Pension Age Test, Mr Burgess said. Unless a person is retiring due to ill health, this test requires that benefits are not to be paid before age 55.
“We understand that in a meeting between Treasury and Her Majesty’s Revenue and Customs (HMRC) last Friday, the HMRC advised Treasury that Australian super funds would not be able to comply with the new QROPS requirements because of the overarching legal framework in Australia,” Mr Burgess said.
“We think this may be a reference to the mandatory requirement to release a benefit in Australia under a release authority basis. This appears to be the case regardless of what amendments are made to the fund’s trust deed."
Mr Burgess said that while most of the discussion appears to be in the context of retail funds, it is likely “the same argument” will apply to SMSFs.
“For UK transfers which have occurred since 6 April 2015, it appears the HMRC may consider relief but the process to apply for that relief is yet to be determined. Unless Treasury is successful in securing some modifications to the QROPS requirements, which at this stage appears unlikely, the prospect of any future UK transfers to Australian superannuation funds, including SMSFs, also appears unlikely,” Mr Burgess said.
At this point, it appears Friday’s development will not have an impact on SMSFs that received UK transfers before April 6 this year.
It seems one impact will be that, for UK reporting purposes, these funds will essentially take on the status of a former QROPS. However, Mr Burgess said this should have no impact on the tax treatment of UK funds transferred into their fund before April 6, assuming they had previously met the QROPS conditions.