Written by Tracey Scotchbrook, Policy Manager, SMSF Association
In my previous article, ‘So you’re thinking about transferring your foreign pension fund to Australia‘, I highlighted some of the important things you need to consider before transferring your foreign pension funds to Australia. In this article I will explore the Australian income tax implications.
Where a lump sum is transferred within the first six months of your first day of Australian tax residency, which may have commenced on the day you first arrived, the whole of the amount transferred is received tax free. This applies whether the lump is paid to you personally or into your superannuation fund. An amount transferred into your Australian superannuation fund will be classed as a non-concessional contribution and need to comply with the superannuation contribution rules and caps, at the time the contribution is made.
Amounts transferred after the first six months will be taxed on the applicable fund earnings portion of the lump sum. ‘Applicable fund earnings’ or AFE is a fancy way of saying the growth on your foreign pension fund since just before your Australian tax residency, up to the date of transfer. Or if you have previously transferred a lump sum, the growth from the time of the previous lump sum up to the date of the current payment or transfer.
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