I’m a 64-year-old expat Australian and having been living and working in the UK for well over two decades, I am now planning for my retirement.
Australia has a compulsory pension scheme called superannuation — I have A$168,226 (£81,351) in my public sector superannuation accumulation plan account.
The problem I have is that you can’t transfer money from an Aussie super account into a UK pension (which I have). Frustratingly, if you’re moving to Australia you can transfer your UK pension into an authorised Aussie super account (without charges and penalties) but it doesn’t work the other way around.
If I transfer the money into my UK current account, will HM Revenue & Customs view this as income? Is there a way I can access my super in a tax-efficient manner?
Estella Bogira, partner at Stephenson Harwood, says you are in a position familiar to many readers. Unfortunately, there is no simple solution for you to receive your Australian superannuation (super) funds without paying UK income tax; even if you paid income tax in Australia on your contributions to the super.
As a UK resident, HMRC taxes your worldwide income, which means you must pay income tax on all income you receive, not just on income generated in the UK. The tax rules for overseas pensions are complex, but the starting point is that income from non-UK pension schemes is taxable in full in the UK. Tax is applied at your marginal rate.
This is the case whether distributions from your super are paid to an account in Australia or into a UK bank account. The law requires that you notify HMRC of the income received via a self-assessment tax return. There is a special section for declaring non-UK pension income.
The good news is that the double tax treaty in place between the UK and Australia seeks to eliminate double taxation on the payment of pensions. This means that you should not pay income tax in both Australia and the UK. The treaty provides that pension income paid from an Australian pension scheme, such as your super, to a UK resident is taxable only in the UK.
This does not mean that you will not be subject to tax in Australia, but that if tax is automatically withheld on a distribution, you can make a claim under the treaty to the Australian tax authorities to have the withheld tax refunded.
In terms of planning, I’m afraid there is not much that can be done in your situation. As UK income tax is applied at your marginal rate (rather than a flat rate of tax) you may be able to limit the amount of tax payable by controlling the rate of distributions. For example, and imagining for ease that the super is your only source of income, if you take the full amount in one tax year you will pay tax at a rate of 40 per cent on some of the income, whereas if you take it over two tax years you will pay tax at a maximum rate of 20 per cent.
The taxation of non-UK pensions is extremely complex, and your personal circumstances could potentially change the above analysis. I recommend that you also contact your super provider and potentially an Australian adviser to ask how they propose dealing with the taxation of your benefits. Before taking any action, you will want to understand the position in Australia so that if, for example, you need to make a claim for tax relief you’re prepared in advance. This will help ensure you receive the amount due to you, and pay the necessary tax, in the most efficient way.
Is my estranged husband lying about his assets?
My husband and I are going through a divorce and, so far, everything has been amicable and productive, including on the question of dividing our finances. However, I’m increasingly concerned he is not being honest about the value of some assets that are in his name, in order to secure a more favourable outcome for himself. For example, over the years we’ve had many discussions about the value of his small business, but the figure he has put forward does not align with what he’s said in the past. What options do I have to ensure our finances are separated fairly?
Katie Longmate, partner in the family team at Russell-Cooke, says clarity around each other’s financial circumstances is essential for ensuring a fair outcome when separating your finances on divorce. Having correct information allows you both to feel comfortable enough to make informed decisions concerning a settlement.
Both parties are legally required to provide “full and frank” disclosure of their respective financial circumstances. This includes any income, savings, investments, liabilities, pensions, properties and business interests.
You can agree to provide this information voluntarily, as part of your discussions and negotiations, or more formally, through court proceedings if a dispute arises.
Being amicable is helpful and constructive, but that doesn’t mean accepting what you are told without question. You can still be amicable while ensuring you each get the information you need.
Many couples use the court Form E Financial Statement as the starting point. It helps identify what information and documentation is needed.
It’s important that you feel able to question your husband about the assets and specifically the company. However, this can be difficult if emotions are running high, or you are not sure what questions to ask.
There may be legitimate reasons why he has not valued the company as high as previously — for example, a change in trading conditions or a loss of key customers — but it’s reasonable to ask about the change, to satisfy yourself that the new value is genuine and not designed to limit or frustrate your potential share.
You can look at Companies House, if the company is registered, to check the figures he has presented are aligned. You can request key documents such as the balance sheets, profit and loss account, forecasts and board minutes. If there is an accountant involved in the business, they could provide a valuation or answer your questions, as valuing business interests in private companies is notoriously difficult.
Our next question
I live in Wimbledon and normally love watching the tennis each summer, being able to beat the queue for tickets on the day. Next year, though, I have decided to forgo the strawberries and cream to go on holiday with my family during the tournament. We have been looking into our options for letting our house for the duration, but we want to make sure the income from the rental is taxed correctly. What do we need to consider?
You have lots of options when it comes to finding a resolution. A mediator is a neutral third party who can help you both gather the information and explore options together. You can search for a local mediator on the Family Mediation Council website. They cannot give legal advice, so it’s worth considering getting independent legal advice alongside a mediator and/or to help with disclosure.
If you are still concerned that your husband may be concealing assets or he is unwilling to provide answers to reasonable requests for information, you can ask the court to intervene. During financial remedy proceedings, the court will make an order for you both to provide financial disclosure and failure to comply can lead to penalties. You can agree together, or the court can make an order to appoint a business valuer to provide an independent opinion.
A pragmatic first step could be asking an accountant to help you review and understand the business disclosure to decide whether a formal valuation is required.
The opinions in this column are intended for general information purposes only and should not be used as a substitute for professional advice. The Financial Times Ltd and the authors are not responsible for any direct or indirect result arising from any reliance placed on replies, including any loss, and exclude liability to the full extent.
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