What is QROPS Australia?
Have you lived and worked in the UK all these years? In that case, you must have built up your very own pension benefits. However, once you become a permanent resident of Australia, it is for your own benefit that you transfer all your built-up UK pensions to a reliable Australian superannuation scheme. Most of you must be wondering about the reason behind this.
Well, this is mainly because any benefit that you receive from any UK pension scheme during your retirement, which also includes your Tax-Free Cash, is taxable by the ATO. However, whether you actually pay the tax or not is entirely dependent on your personal circumstances. You will also be subjected to any fluctuation in the foreign exchange rates between AUD and GBP for the rest of your life (full details can be found at hardingwealthmanagement.com.au/qrops-australia/). In other words, this basically means that any effective long-term planning becomes almost impossible.
What Exactly Is QROPS?
If you wish to transfer your entire UK pension benefits to any specific foreign jurisdiction without receiving any heavy tax levies, you should make sure that the receiving scheme has QROPS status. When you talk about QROPS, it basically means Qualifying Recognized Overseas Pension Scheme and it happens to be an HMRC requirement. If the need arises for you to transfer your UK pension benefits to an Australian superannuation fund, then you must ensure that the fund has QROPS status. If you do not check this and the scheme you choose does not have the QROPS status, then you may have to pay a heavy penalty that may be as high as 55% of the fund value.
When it comes to restrictions for applying to an Australian QROPS fund, it is subjected to both UK and Australian rules. Some of these rules are listed below.
- You must be 55 years old or above while applying for QROPS status of your super fund.
- The fund that you choose should report to HMRC every 5 years.
- You have to invest in the Australian QROPS fund for 10 straight UK tax years from the day you ceased your UK tax status and for a minimum of 5 years since the time you transferred your UK tax funds to the Australian QROPS.
- You should have an investment strategy that strictly follows UK restrictions. Even if you invest on an authorized vehicle, such as a residential property, it shall be deemed as an unauthorized payment and you will be subjected to a 55% tax levy.
- Your age should be below 75 years and for those above 65 years of age, they need satisfy “Work Test” requirements.
- If you are above the age of 55 years and below the age of 65 years, you will have to contribute $100000 every tax year and by utilizing the bring forward rule, you can contribute $30000 in a single tax year simply by using the following 2 tax years limits.
- The amount to be transferred that is classed against your contribution levels happens to be the value the day before you actually become an Australian ta resident.