• Tax treatment of transfers from foreign super funds

    This information sets out the Australian tax treatment of a transfer from a foreign super fund. You may be subject to other obligations in the foreign country.

    You may be able to transfer an amount from a foreign super fund to:

    • a complying Australian super fund
    • yourself.

    Making these transfers will depend on the rules of the super fund from which you are making the transfer.

    You or your fund may have to pay income tax on some or all of the amount.

    If you transfer the amount to a complying Australian super fund, the amount will generally count towards either or both of your contributions caps and you may have to pay excess contributions tax.

    When we say 'super interest' we mean any amount, benefit or entitlement that a member holds in a fund.

    Find out about:

    Transferring amounts to a complying Australian super fund

    You must meet certain conditions before you can transfer an amount from your foreign super fund into your complying Australian super fund.

    A transfer from your foreign super fund is a member contribution.

    Conditions for transfers into Australian super funds

    Condition

    Requirements

    Age limits

    If you are 65 years old or more at the time of the transfer, your Australian super fund can only accept the contribution if you meet the work test.

    The 'work test' requires a person to have worked at least 40 hours within 30 consecutive days in a financial year. People who are between 65 and 74 years old must meet the work test to be allowed to make personal superannuation contributions.

    If you are under 65 years old at the time of the transfer, your Australian super fund can accept the contribution even if you are not working.

    Your Australian super fund cannot accept a member contribution for you if you are 75 years old or more.

    Tax file number

    Your Australian super fund cannot accept a transfer from your foreign fund unless either:

    • you have given your tax file number (TFN) to your Australian super fund
    • you give your TFN to your Australian super fund within 30 days of making the foreign transfer.

    If your Australian super fund does not have your TFN they must return the whole amount to your foreign fund.

    Fund-capped contribution limit

    If your Australian super fund receives a transfer from your foreign fund which is more than your fund-capped contribution limit, it must return to the foreign fund the amount which is over your fund-capped contribution limit within 30 days.

    This rule is designed to prevent you from inadvertently exceeding your non-concessional contributions cap.

    You cannot claim a personal superannuation deduction for any part of the transfer from the foreign fund.

    Your fund-capped contribution limit for a financial year depends on your age on 1 July of the financial year.

    If, on 1 July of the financial year, you are:

    • 65 years old or more, your fund-capped contribution limit is the non-concessional contributions cap for that financial year
    • 64 years old or less, your fund-capped contribution limit is three times the non-concessional contributions cap for that financial year.

    For more information on the non-concessional contributions cap for a financial year, see Key superannuation rates and thresholds.

    Example: Super transfer when 65 years old or more

    Santiago is 68 years old and transfers his super interest of $A198,000 from Argentina to Australia in 2015–16. Santiago was unaware that the contribution would count towards his non-concessional contributions cap. He meets the work test and has given his fund his tax file number. However, as he is older than 65, his fund-capped contribution limit is only $150,000.

    Santiago's Australian super fund must return the excess $A48,000 to his super fund in Argentina. He waits until the next financial year to transfer the excess $48,000 to his Australian super fund so that he doesn’t exceed his non-concessional contributions cap.

    End of example

    Income tax

    You have to pay income tax on the applicable fund earnings component of a foreign fund transfer.

    Applicable fund earnings

    In general terms, the applicable fund earnings are the earnings on your foreign super interest which have accrued since you became a resident of Australia.

    How the applicable fund earnings are calculated depends on whether you were an Australian resident at all times during the period to which the lump sum relates. The way to calculate your applicable fund earnings is set out at section 305-75 of the Income Tax Assessment Act 1997.

    You can request a private ruling to determine how much of a transfer is applicable fund earnings.

    See also:

    The six-month rule

    None of your foreign super interest is treated as applicable fund earnings if you transfer it to Australia within six months of either:

    • becoming a resident of Australia
    • your foreign employment terminating.

    Example 1: Six-month rule – transfer over six months

    Leonard grew up overseas and contributed to a super scheme under the rules of that country. He emigrated to Australia and became an Australian resident in September 2014. At that time, his super interest was the equivalent of $A300,000.

    In May 2015, Leonard decided to transfer the balance from his foreign super fund to his Australian super fund. The value of his super interest was then $400,000, so his applicable fund earnings were $100,000. He is required to declare this amount in his income tax return (or he may be able to include the amount in his fund’s assessable income – see Including applicable fund earnings in your fund’s assessable income.)

    End of example

     

    Example 2: Six-month rule – transfer within six months

    Cameron worked overseas for two and a half years and accrued the equivalent of $A25,000 in his foreign super fund. He returned to Australia in July and arranged for the transfer of his foreign super interest in October. The amount transferred was $A27,000, which included $2,000 he earned after he became an Australian resident. However, because Cameron transferred the amount within six months of becoming an Australian resident, none of the amount is treated as applicable fund earnings.

    End of example

    Including applicable fund earnings in your fund’s assessable income

    You may be able to make an election to include some of your applicable fund earnings in your fund’s assessable income. This will mean that your fund will pay the tax on the amount of your applicable fund earnings you elect, instead of you. Your fund pays income tax at 15% which may be less than the rate of tax that you pay.

    There are conditions you need to meet before you can make the election. You must:

    • have been resident in Australia for more than six months or have terminated your employment more than six months ago
    • transfer the whole of the foreign fund interest directly to a complying Australian super fund.

    If you do not meet the conditions you must still include any applicable fund earnings in your personal assessable income but you cannot elect to include any of the amount in your fund’s assessable income.

    Your election must be made in the approved form Choice to have your Australian fund pay tax on a foreign super transfer.

    Example: Including applicable fund earnings

    Tony transfers $160,000 from his foreign super fund to his Australian super fund. The transfer is the whole of his interest in his foreign fund. The applicable fund earnings amount is $40,000. If Tony makes no election he must include the $40,000 in his personal assessable income for the year (taxed at his marginal tax rates).

    If Tony elects to include $30,000 of the applicable fund earnings into his fund’s assessable income, his fund will include $30,000 in its assessable income (taxed at 15%) and Tony must include $10,000 in his personal assessable income for the year (taxed at his marginal tax rates).

    If Tony elects to include $40,000 of the applicable fund earnings into his fund’s assessable income for the year, his fund will include $40,000 in its assessable income (taxed at 15%) and Tony will not have to include any of the amount in his personal assessable income for the year.

    End of example

    If you do not elect to include the amount in your fund’s assessable income, the applicable fund earnings are personally assessable to you and you will need to include this amount in your income tax return.

    Next step:

    Excess contributions tax

    When you transfer an amount from your foreign super fund to your Australian super fund, your fund will report the transfer as a contribution for you for the year.

    We use the contributions your fund reports to work out your concessional and non-concessional contributions for the year.

    How your fund reports a foreign fund transfer

    Your fund must include the transfer in the contributions it reports for you.

    Your fund will report the transfer at either or both of the:

    • Non-assessable foreign fund amount label
    • Assessable foreign fund amount label.

    If you elect to include some of your applicable fund earnings in your fund’s assessable income, the amount you elect will not be reported at either of these labels. It will be reported as part of your total contributions.

    See also:

    Non-assessable foreign fund amount

    Generally, most of a transfer from a foreign fund will consist of an amount which the fund does not include in its assessable income (unless you make an election). This amount will generally consist of contributions you have made to the foreign fund and the earnings on those contributions.

    The non-assessable amount is the amount of the transfer which was ‘vested’ in you at the time of the transfer. Vested means that you were entitled to it – it had to be paid to you at law if you met any other necessary conditions.

    Fund earnings will generally have been vested in you at the time of the transfer even if they weren't allocated to your account until the time of the transfer.

    The non-assessable foreign fund amount your fund reports will include any applicable fund earnings unless you have made an election to include all or part of the applicable fund earnings in your fund’s assessable income.

    If you elect to include some or all of your applicable fund earnings in the assessable income of your fund, your fund will not report at this label the amount you elect, even though it is now included in the fund’s assessable income. The amount is no longer treated as a contribution but treated like normal earnings of your fund.

    The amount reported at the Non-assessable foreign fund amount label is counted towards your non-concessional contributions.

    Assessable foreign fund amount

    Any amount of a foreign fund transfer that exceeds the amount that was vested in you at the time of transfer is included in the assessable income of the fund.

    The amount reported at the Assessable foreign fund amount label is counted towards your concessional contributions.

    Example 1: Assessable transfer – discretionary payment

    When John arranged for a transfer from his foreign super fund to his Australian super fund, his account balance was $A300,000. However, his foreign employer allocated an additional $75,000 to John as a discretionary payment in recognition of his years of service. The additional $75,000 is the assessable component of the total transfer amount of $375,000.

    Example 2: Assessable transfer – vested earnings

    When Guy arranged for a transfer from his foreign fund to his Australian super fund, his account balance was $200,000. However, as part of finalising Guy’s account, his foreign fund credited $15,000 in earnings to his balance. Normally, this would not have been done until the end of the calendar year. However, under the rules of the foreign fund, earnings must be credited to an account prior to its closure. In this example, the earnings were vested in Guy, even though they would not have been credited to his account until later in the year if he had not requested the transfer.

    End of example

    Case study – Marianne

    The following case study outlines the income tax and excess contributions tax consequences of a transfer from a foreign super fund, depending on the amount of applicable fund earnings the member elects to include in the fund's assessable income.

    Marianne, who is 62 years old, transferred $420,000 from her foreign super fund to her complying Australian super fund in 2015–16, several years after she became resident in Australia. She had given her tax file number (TFN) to her fund when she opened her account. Her fund-capped contribution limit is $450,000. As she is 62 years old, her fund does not have to confirm that she meets the work test before accepting her contribution.

    Marianne's transfer consisted of:

    • $400,000 which was vested in her at the time of the transfer, of which $50,000 was applicable fund earnings
    • $20,000 which her foreign employer added to her account balance at the time of the transfer as a discretionary payment.

    Option 1: not including any applicable fund earnings

    Marianne decides not to include any of the applicable fund earnings in her super fund’s assessable income.

    Her fund reports:

    • $400,000 at the Non-assessable foreign fund amount label
    • $20,000 at the Assessable foreign fund amount label
    • $420,000 at the Total contributions label.
    Marianne's tax payable – option 1

    Income tax

    Marianne must include $50,000 applicable fund earnings in her personal assessable income for the year and pay tax on the amount at her marginal tax rates.

    The fund must include $20,000 in its assessable income for the year and pay tax on the amount at 15%.

    Excess contributions tax

    $400,000 is counted towards Marianne’s non-concessional contributions.

    $20,000 is counted towards Marianne’s concessional contributions.

    Option 2: including all applicable fund earnings

    Marianne decides to include all of the applicable fund earnings in her super fund’s assessable income.

    Her fund reports:

    • $350,000 at the Non-assessable foreign fund amount label
    • $20,000 at the Assessable foreign fund amount label
    • $420,000 at the Total contributions label.
    Marianne's tax payable – option 2

    Income tax

    Marianne does not include any amount of the transfer in her personal assessable income for the year as she had elected for the full amount of her applicable fund earnings to be included in the fund's assessable income.

    The fund must include $70,000 ($20,000 + $50,000) in its assessable income for the year and pay tax on the amount at 15%.

    Excess contributions tax

    $350,000 is counted towards Marianne’s non-concessional contributions.

    $20,000 is counted towards Marianne’s concessional contributions.

    The $50,000 does not count towards either her concessional or non-concessional contributions.

    Option 3: including part of applicable fund earnings

    Marianne decides to include part of the applicable fund earnings in her super fund’s assessable income. She elects to include an amount of $30,000.

    Her fund reports:

    • $370,000 at the Non-assessable foreign fund amount label
    • $20,000 at the Assessable foreign fund amount label
    • $420,000 at the Total contributions label.
    Marianne's tax payable – option 3

    Income tax

    Marianne must include $20,000 (her applicable fund earnings of $50,000 less the $30,000 she has elected to include in the fund's assessable income) in her personal assessable income for the year and pay tax on the amount at her marginal tax rates.

    The fund must include $50,000 ($20,000 + $30,000) in its assessable income for the year and pay tax on the amount at 15%.

    Excess contributions tax

    $350,000 is counted towards Marianne’s non-concessional contributions.

    $20,000 is counted towards Marianne’s concessional contributions.

    The $30,000 does not count towards either her concessional or non-concessional contributions.

    See also:

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    • Last modified: 24 Aug 2016QC 24169