SUPER PLUS ARE THE PIONEERS
OF SMSF UK TRANSFERS
As a result of the March Spring Budget 2017 new requirements have been introduced by HMRC. This applies to transfers that occur on or after 9th March 2017. HMRC link to changes (click)
Residency
If a QROPS scheme and member are NOT resident in the same country then a 25% UK tax will apply on transfer and will be deducted by the remitting scheme.
In the case of a QROPS registered SMSF, this means the transfer must occur directly between the UK scheme and the Australian scheme (SMSF), it cannot be first transferred to a third country, eg going to a New Zealand scheme first, if the individual is resident in Australia will result in a 25% tax charge.
Change to Residency after transfer
If the residency status changes to another country within 5 UK tax years after transfer, so that the exemptions would not have applied at time of transfer, then the 25% UK tax will also apply.
Payment within 5 UK tax years of transfer
A payment out of funds transferred to a QROPS on or after 6 April 2017 will be subject to UK tax rules for five UK tax years after the date of transfer, regardless of where the individual is resident.
However for Australian residents, the Double Taxation Convention between UK - Australian, will dictate how pension payments are treated from an Australian scheme.
Existing QROPS registration changes
All existing QROPS registered funds required the scheme manager to sign a new HMRC undertaking. This must have been posted and received by HMRC on or before 13 April 2017. If not received, the existing QROPS registration will have been cancelled, and the scheme will no longer be QROPS registered..
A transfer to a non registered QROPS will result in an unauthorised payment charge. Un-authorised payment charges can be up to 55%.
Age 55+ requirement
HMRC will allow QROPS registration of schemes (subject to all ROPS conditions being met) where the membership is restricted to members over the age of 55 (in the case of an SMSF by amending the trust deed).
Super Plus can arrange via our legal provider for a new or existing SMSF to have the appropriate deed rules to allow members over age 55 to receive a UK transfer.
Super Plus was the originator of the age 55+ member exclusion concept and approach, which resulted in the deed responsible for the first HMRC ROPS registered Australian scheme under the new HMRC rules!
Caution should be used when considering a transfer. Any transfer not strictly conforming to the HMRC requirements is likely to result in a un-authorised payments charge of up to 55% tax on your transferred funds.
Please note this is general guidance only and should in no way be taken as advice to establish an SMSF or conduct any sort of superannuation/pension transfer. Specific financial advice should be sort in relation to these matters. Super Plus does not provide any advice or view as to whether a transfer is or is not appropriate.
What is QROPS/ROPS?
Any transfer of UK benefits to an overseas scheme is only permitted if the transfer is going to a scheme that has been registered with HM Revenue & Customs (HMRC). This is a QROPS scheme, and to be a QROPS, the scheme must meet the ROPS (Recognised Overseas Pension Scheme) legislative requirements and the scheme must also agree to report specific matters to HMRC.
It is vital that before you transfer any benefits from the UK you consider all your options and seek financial advice. A transfer may not always be possible or your best option.
Transfer to a non ROPS compliant scheme will result in a 40% to 55% tax charge on the transfer from your UK fund.
UK Defined Benefit scheme transfers after 6 April 2015
Transfers from "unfunded" defined benefit Government schemes (e.g. NHS, Teaches, police, army) will no longer be permitted.
Transfers from "funded" defined benefit Government schemes (e.g. Local government schemes) will still be permitted, however transfer values may be reduced.
Transfers from funded defined benefit schemes will still be permitted. UK independent financial advice must be received prior to transfer. The adviser must also be independent of the scheme and must be registered in the UK, therefore an adviser registered in Australia only, is not authorised to provide this advice.
Registration and reporting
In addition to registration, the scheme needs to meet specific reporting and access requirements that range from a period of 5 (10 years from 6 April 2017) after you leave UK residency and 10 years after you make a transfer of benefits from the UK.
Super Plus can establish a new SMSF or register your existing SMSF to meet the ROPS requirements (if members are over age 55) However we only provide the QROPS registration service for SMSFs where we are the appointed administrator/accountant. We can refer you to an alternative service in other instances.
We charge a fee of $330 + GST to register a SMSF as a QROPS.
Ongoing, we charge a nominal $10 + GST per month in addition to our standard fee for the additional administration requirements (up to 10 years from date of transferring from the UK).
To ensure the ongoing requirements are met and to satisfy the registration declarations, Super Plus MUST be providing the administration service to the SMSF.
Super Plus will under no circumstances register an SMSF as a QROPS/ROPS were we are not performing the SMSF accounting and compliance work.
Given our experience with QROPS/ROPS registered funds and our quality service, we’re the best administrator for your QROPS/ROPS registered fund.
Experience where it Matters
You don’t want just anyone providing this service, you want experience! We have been providing UK scheme transfer services since 2001 (before the QROPS requirements), so we are able to provide both Financial Advisers and Trustees the support they need.
Seek specialist advice
If you are uncertain about how to or if you should transfer your UK benefits, SEEK FINANCIAL ADVICE FROM A QUALIFIED INDEPENDENT ADVISER. The advice should also consider (if applicable) in what circumstances it may be better not to transfer.
The QROPS/ROPS registration and transfer process
| DECIDE | Decide if your UK benefits are best held in a SMSF |
| SETUP | Setup a new SMSF or have Super Plus administer your existing SMSF |
| REGISTER | Super Plus registers your SMSF as a QROPS/ROPS fund |
| Takes 4 to 5 weeks for the application to receive confirmation | |
| TRANSFER | Transfer your UK benefits to the SMSF |
| Transfer your Australian super to the SMSF (if appropriate) | |
| REVIEW | Review the transfers |
| Australian tax paid on growth portion of transfer | |
| MINUTES | Super Plus prepares the various minutes to record the process |
| Financial entries completed | |
| REPORT | Super Plus completes regular reviews and reports to HMRC (UK authority) on any reportable events |
| RELAX | You, the Trustee can relax knowing the QROPS/ROPS and SMSF requirements are dealt with |
More information and Australia matters
– General guide only
This area is complex and specialist advice should be sought before making any decision, as you may be giving up significant benefits in your UK scheme.
Australian treatment on transfer
The value of the UK pension fund benefit at the date of residency in Australia is treated as a Non-Concessional Contribution (NCC) and not taxed in the Australian fund when received.
The increase in value between the date of residence and the date the funds are transferred to Australia is tax free if transferred within 6 months of tax residence. After 6 months the increase in value is taxed at a rate of 15% within the Australian fund.
Limits on amount received in Australia.
Any transfer into an Australian fund will be required to have a value less than the Australian contribution limits for Non-Concessional Contributions.
Amounts over this limit will be subject to a penalty rate of tax and therefore consideration should be given to a staged transfer strategy over a period of years in such circumstances.
There is no cap on the Concessional Contribution (CC) part, i.e. the growth portion, when it applies to an overseas super transfer.
Please refer to the NCC contribution limits in Knowledge Basics and do not exceed these limits.
Restriction once in Australia
There will be the normal superannuation restrictions on benefits within Australia. As the transfer has come from the UK, there are restrictions on transfering to another scheme, in that any scheme that hold the funds must be a QROPS/ROPS registered scheme.
The SMSF must report (to HMRC for a period of 10 years from the date of transfer from the UK), certain matters, e.g. withdrawals, pension commencements and transfers. If a transfer occurs from a QROPS/ROPS scheme to a non QROPS/ROPS scheme inside the reporting period there may be penalty tax of 40% and the existing fund will lose it QROPS/ROPS status.
Investment restrictions (residential property and collectables)
HMRC do not allow investments in “Taxable Property” in some circumstances. This is essentially residential property, holiday homes, timeshares. Therefore if you register your SMSF as a QROPS/ROPS an investment in residential property may be a breach, and there will be a substantial tax penalty.
However changes to the UK regulations, implemented in April 2018 now mean that where a member has placed the QROPS transfers into drawdown (eg commenced a pension), it has the effect of moving funds outside the taxable property prrovisions.
The same restriction also applies to collectables (art, coins, stamps, boats, cars etc).
These rules are complicated and therefore specific financial advice should be sort from a financial adviser experienced in QROPS transfers.
Residency
Residence for the purposes of the overseas transfer is treated as "tax residence", so it is generally the date of arrival to take up permanent residence. This date may be different from actual immigration residence as someone may be on a temporary visa before becoming a permanent resident, which may occur sometime later.
A transfer before becoming a permanent resident may not be prudent due to restrictions on transferring super out of Australia. Specialist advice should be sought regarding this issue.
Returning to the UK to resume residence can have significant implications. This is because a payment from a QROPS/ROPS fund to a UK resident may result in an unauthorised payments charge and penalty tax of 40%. Therefore you need to consider your longer term plans and if returning to the UK is a reasonable prospect, then it may be best not to transfer your UK benefits to Australia.
Act in advance
As there is only a 6 month window to transfer benefits to an Australia scheme tax free, clients need to consider the options early. UK residents can speed up this process by requesting a Cash Equivalent Transfer Value (CETV) from their current UK scheme(s) the day they depart the UK (have it posted to you in Australia via airmail or posted to a reliable UK friend that can quickly forward it to you). UK schemes must provide a CETV once a year free of charge, additional CETV’s may result in a fee.
More Help?
Contact us at Super Plus
Find a UK Adviser www.thepfs.org
HMRC (HM Revenue and Customs) www.hmrc.gov.uk/pensionschemes
