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Transfer from a foreign super fund to an Australian super fund

Tax treatment and rules that apply to transfers from a foreign super fund to an Australian super fund.

Last updated 1 August 2023

Overview

Money you transfer from a foreign super fund to a complying Australian super fund may:

  • count towards you super contributions caps, and be subject to additional tax if you exceed the caps
  • be subject to Australian income tax
  • be subject to rules and tax in the foreign country.

Certain conditions must be met before your complying Australian super fund can accept a transfer from your foreign super fund.

Transfers between Australian super funds and New Zealand KiwiSaver schemes are treated differently under the Trans-Tasman Retirement Savings Portability scheme.

Transfers from foreign super funds are member contributions

A transfer from a foreign super fund to a complying Australian super fund is treated as a member contribution.

Transfers from foreign super funds are subject to the same restrictions and limits that apply to contributions generally. To understand how they are treated as concessional or non-concessional contributions, see How your Australian fund reports a foreign transfer.

Your Australian super fund must have your TFN

An Australian super fund cannot accept a transfer from a foreign fund unless they have your tax file number (TFN), or you give it to them within 30 days of the transfer. If your Australian super fund doesn't have your TFN within 30 days of the transfer they must return the whole amount to your foreign fund.

Australian tax is paid on applicable fund earnings

You (or your Australian super fund) must pay income tax on the part of a foreign fund transfer that is applicable fund earnings.

The applicable fund earnings are the earnings on your foreign super interest that have accrued since you became an Australian resident for tax purposes. 'Super interest' is any amount, benefit or entitlement a member holds in a fund.

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 6-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 an Australian resident for tax purposes
  • your foreign employment ceasing.

Example: applicable fund earnings transferred after 6 months

Leonard grew up overseas and contributed to a retirement savings scheme in his home country. He emigrated to Australia and became an Australian resident for tax purposes in September 2018. At that time, the value of his super interest was the equivalent of A$300,000.

In May 2019, Leonard decided to transfer the balance of 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 tax return or in his fund’s assessable income.

However, had Leonard transferred the amount within 6 months of becoming an Australian resident, none of the amount would be treated as applicable fund earnings.

End of example

Including applicable fund earnings in your fund’s assessable income

You may be able to choose to include some amount of your applicable fund earnings in your fund’s assessable income. In this case, the amount will be taxed in your fund instead of as part of your income. Your fund pays income tax at 15%, which may be less than the rate of tax you pay.

To make a choice, you must meet all of the following conditions:

  • you have been an Australian resident for tax purposes for more than 6 months or have terminated your employment more than 6 months ago
  • you have transferred the whole of the foreign fund interest directly to a complying Australian super fund
  • you no longer have a super interest in the foreign fund.

If you don't meet these conditions you can't choose to include any amount in your fund’s assessable income. Instead, you must include any applicable fund earnings in your personal assessable income.

You make this choice on the Completing your choice to have your Australian fund pay tax on a foreign super transfer form.

Example: applicable fund earnings and assessable income

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. His applicable fund earnings amount is $40,000. If Tony doesn't elect to include any of this amount in his Australian super fund's assessable income, 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 in his fund’s assessable income, his fund will include this amount in its assessable income (taxed at 15%) and he must include $10,000 in his personal assessable income (taxed at his marginal tax rate).

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

End of example

How your Australian fund reports a foreign transfer

When you transfer an amount from your foreign super fund to your Australian super fund, your Australian fund will report the transfer as a contribution for you for the year. It will be counted as either, or a combination of:

If you choose to include some of your applicable fund earnings in your fund’s assessable income, the amount will be reported as part of your total contributions (increasing your total superannuation balance) but doesn't count towards your contributions caps.

Non-assessable foreign fund amount

Generally, most of a transfer from a foreign fund will consist of contributions you have made to the foreign fund and the earnings on those contributions.

The non-assessable amount is the amount that was vested (paid to you or for which you're entitled by law) at the time of the transfer. This will include earnings on your contributions from the foreign fund even if the earnings were not allocated to you at the time of the transfer.

Applicable fund earnings are included in the non-assessable foreign fund amount, less any amount you choose to include in the fund's assessable income. This amount is no longer treated as a contribution but treated like normal earnings of your fund.

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 fund's assessable income.

Example: assessable component of the transfer from foreign fund

When John arranged for a transfer from his foreign super fund to his Australian super fund, his account balance was A$300,000. However, John's foreign employer allocated to him an additional $75,000 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.

End of example

 

Example: choosing the amount of applicable fund earnings to include in your fund's assessable income

Marianne, 62, transferred $420,000 from her foreign super fund to her complying Australian super fund in 2018–19, several years after she became resident in Australia.

  • Marianne had given her TFN to her fund when she opened her account.
  • As she is 62 years old, her fund does not have to confirm that she meets the work test before accepting the contribution.

The 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.

There are three options available to Marianne.

Option 1

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

Her fund reports:

  • $400,000 as the Non-assessable foreign fund amount
  • $20,000 as the Assessable foreign fund amount
  • $420,000 as Total contributions.

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

  • $400,000 is counted towards Marianne’s non-concessional contributions cap (which is $300,000 for the year).
  • $20,000 is counted towards Marianne’s concessional contributions cap (which is $27,500 for the year).
  • When Marianne's fund reports the foreign fund transfer she will be issued with an excess non-concessional contributions determination and the excess may be subject to additional tax.

Option 2

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

Her fund reports:

  • $350,000 as the Non-assessable foreign fund amount
  • $20,000 as the Assessable foreign fund amount
  • $420,000 at Total contributions.

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

  • $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

Marianne chooses to include $30,000 of her applicable fund earnings in her super fund’s assessable income.

Her fund reports:

  • $370,000 as the Non-assessable foreign fund amount
  • $20,000 as the Assessable foreign fund amount
  • $420,000 as Total contributions.

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.
End of example

For more information see Tax treatment of transfers from foreign super funds.

Transfers from United Kingdom funds

United Kingdom (UK) funds must comply with the requirements of His Majesty’s Revenue and Customs (HMRC). The HMRC website has information about transferring amounts from UK funds to non-UK funds, including Australian super funds or residents.

For more information:

QC21943