Transferring amounts to yourself
There are tax consequences when transferring amounts from a foreign super fund to yourself.
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Income tax
If the lump sum from the foreign super fund is paid to you (or to another person or entity on your behalf), then the assessable amount of the payment and any applicable fund earnings must be included in your assessable income and will be taxed at your marginal rate.
The remainder of the transfer will not be subject to income tax.
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 must be included in your personal assessable income.
Applicable fund earnings
Broadly, 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.
The six-month rule
None of your foreign super interest is treated as applicable fund earnings if you transfer it to Australia within 6 months of:
- becoming a resident of Australia, or
- your foreign employment terminating.
Example: applicable fund earnings and becoming an Australian resident
In June 2005, Hassan left Australia and worked overseas. During this time, he contributed to a foreign super fund. In July 2008, Hassan returned to Australia and immediately again became an Australian resident for tax purposes. At this time, his foreign super interest was valued at $12,000.
In February 2009, Hassan decided to transfer the balance from his foreign super fund to himself. The value of his super interest was then $13,500, of which $1,500 was earned since he became an Australian resident. The $1,500 represents applicable fund earnings which Hassan is required to declare in his tax return. Hassan does not have to include the $12,000 in his assessable income.
End of exampleExcess contributions tax
When transferring funds from a foreign super fund to yourself, none of the transfer will count towards your superannuation contributions caps.