Superannuation (& Pension Transfers)*
PLEASE NOTE: All of this section on Superannuation & Pension Transfers is provided for general information purposes only and is sourced from the Australian tax office (ATO) and Australian Securities and Investments Commission (ASIC) websites and should not be regarded as advice in any form. Superannuation advice should be sought from a suitably qualified and regulated financial planner authorised to provide you with advice. Move to Australia, MovetoAus.com.au and its directors take no responsibility for the information provided and its accuracy.
Choice of Superannuation Fund
When you are employed in Australia, it is compulsory for your employer to make a minimum contribution (currently 9.5%) of your annual salary and based on ‘ordinary time earnings’. Ordinary time earnings are what you earn for your ordinary hours of work including over-award payments, commissions, certain paid leave, bonus payments and allowances. This payment is in addition to your salary and is paid into either your employer’s choice of fund (if you haven’t chosen your own fund) or the fund that you have chosen and provided the details to your employer.
For example: your salary is $50,000 (ordinary time earnings), you should be paid an additional $4,750 per year into your super account.
Your employer cannot stipulate a fund on your behalf as you can choose your own approved superannuation fund, though you can opt to use the fund recommended by your employer if you haven’t chosen another one. You can also switch funds whenever you wish to, just remember to pass on your new fund’s details to your employer if you do.
Contributions to super by your employer are referred to by the Australian tax office (ATO) as concessional (before tax) contributions. These before tax (concessional) contributions are taxed by your super fund at 15% as long as they fall below the concessional contribution cap (maximum annual amount as stipulated by the ATO), currently $30,000 for the 2014/2015 tax year.
Adding Your Own Super Contributions (before tax)
In addition to the minimum contribution your employer has to make to your superannuation, you can also make your own contributions from your before tax pay, by telling your employer you want to contribute extra to your super. Your employer will then make the extra contributions out of your before tax pay into your super account on your behalf. This effectively reduces your taxable income and helps to increase the amount of your superannuation. This personal before tax contribution to super is also referred to by the Australian taxation office (ATO) as a concessional contribution.
The limit (or cap) for concessional (or before tax) contributions is a total amount and includes compulsory or other contributions by your employer as well as before tax contributions made by you from your salary. The tax deducted by your super fund from your concessional contributions is 15% for contributions below the concessional cap, contributions that are over the concessional cap are taxed at 47%.
The concessional cap is currently $30,000 for the 2014/2015 financial year for individuals under 49 years old on 30 June 2014 and $35,000 for individuals over 49 years old on 30 June 2014.
For more information visit the Australian tax office website
Adding Your Own Super Contributions (after tax)
You can also make super contributions from your after tax savings and these are regarded as non-concessional (after tax) contributions by the ATO, meaning that they are not taxed by your super fund when contributed as long as the total contribution falls below the annual non-concessional cap, which is currently $180,000 (for the 2014/2015 tax year). If you are under 65 years old, you may be able to contribute $540,000 by bringing forward an additional 2 years of contributions in addition to the $180,000 contribution for the 2014/2015 tax year. This is particularly relevant for new migrants who have pensions to transfer to Australia from overseas. This “bring forward rule” was introduced in July 2007 and has generally increased with inflation over the past few tax years, so it is important to seek relevant and accurate advice from a qualified Australian financial planner to take your own personal situation into account.
More information, including a very useful and easy to understand VIDEO can be found on the Australian Tax Office website.
Opening A Superannuation Account
My Future Super is Australia’s first fossil fuel free superannuation fund and it is easy to join their fund online by completing the Online Application Form or you can print, complete and send in their Application Form. Please visit the My Future Super Website for more information and their contact details.
Pension Transfers to Australia
If you arrived in Australia with a permanent residence visa, it is important that you professional seek advice on transferring your pension to Australia (if you intend to remain permanently in Australia) within a few months of your arrival. You have a 6 month period (from your arrival date if you hold a permanent residence visa, or from the date you acquire permanent residence if you arrived on a temporary residence visa) in which to get your international financial affairs in order without incurring any Australian tax liabilities, this includes pension transfers.
Remember, only consider moving your pension to Australia if you are certain that you are staying here permanently as most funds do not allow access to non-concession contributions until you reach retirement age (this means your pension stays in Australia until you retire or reach discretionary retirement age). Many overseas based pension transfer companies try to scare migrants into transferring their pension citing tax liability, the reality is you have six months from your arrival date in Australia to transfer a pension without any Australian tax liability. If you miss the six month period, then the only applicable tax is Australian tax on any growth of the value of your fund between the date you became a permanent resident and the date you transfer your pension. If you have a tax liability, you can ask your Australian pension fund to withhold any applicable tax (at 15%) from the fund itself. There can also be tax implications and you could incur a tax liability if you return to your home country and decide to transfer your superannuation back into your pension account – PLEASE seek appropriate advice before you act!
We advise that you seek the financial planning advice of a CPA Australia accredited Financial Planning Specialist (FPS). CPA Australia is one of the world’s biggest accounting bodies (with over 150,000 members) and their members must comply with a strict code of conduct.
A CPA member who is also an accredited Financial Planning Specialist has to complete a postgraduate or degree qualification majoring in financial planning as well as specific education in either advanced taxation or tax segments of the CPA Program. FPS’s also must have a minimum of 3 years’ experience in financial planning with specific experience in personal income tax planning, risk management, investment planning and personal financial planning.
Please visit the CPA Australia Member Search Tool on the CPA Australia website to find a FPS near you, remember to select the “I am looking for a CPA Financial Planning Specialist (FPS)…” option.
South Africans
In addition to engaging the services of a CPA Australia Financial Planning Specialist (see the section immediately above), you will need the assistance of a South African Reserve Bank approved company in South Africa to assist you with the right advice, processes and approvals to transfer pensions, retirement annuities and preservation funds.
Currencies Direct can assist South Africans living in Australia with all the relevant South African processes, requirements and paperwork to transfer Pensions, Preservation Funds and Retirement Annuities to Australia. Please contact their Cape Town office on (+27) 021 418 0105 for referral to a relevant specialist.
