Fresh warnings on foreign pension transfers
In light of recent legislative changes in the UK, the SMSF Association has urged practitioners to consider whether the characteristics of foreign pension funds meet the definition of an Australian superannuation fund before rolling over funds for clients.
Speaking at the SMSF Association state technical conference, the SMSF Association’s Graeme Colley said when transferring retirement funds, the most common private ruling that the ATO considers is whether an overseas super fund meets the requirements of a super fund under Australian legislation.
“It’s an important factor to consider when you’re, say, looking to transfer money from the US, the Hong Kong, or Europe to Australia,” said Mr Colley.
“You need to work out whether the thing you’re dealing with in an overseas country meets the requirements of a superannuation fund.”
Mr Colley said the US is a good example of vehicles that “look and smell like superannuation funds” but that don’t meet the definition of a superannuation fund – that is a retirement benefit fund.
“When you have a look at the US system, things like 401(k) plans, which are a particular type of deferred benefit fund, are not a superannuation fund simply because you can get your money out of the fund, subject to a tax penalty, for education, for health, for hardship,” said Mr Colley.
“It’s not really a superannuation fund within our meaning.”
Individual retirement accounts, on the other hand, would meet the requirements of a superannuation fund in the true sense of that word under Australian rules, he said.
“In other countries, you’ve always got to go through and look at when those benefits are being provided,” said Mr Colley.
“There are a couple of nice cases there which might seem a bit old now but they really set the precedent as to what a superannuation fund is.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.