Pension Tax Warning for Those Retiring to Australia

Summary: A new scheme could effectively tax British expatriates moving to retire to Australia up to 55% of their pension pot

Australia is regularly one of the top ten destinations for Brits planning on moving abroad to live and work and even retire.  The quality of life, cost of living, favourable climate and lack of a language barrier make the nation an evergreen one in terms of its popularity with expat Britons.  In the past, visa restrictions are all that have stood in the way of many Brits relocating down under, but now a potential 55% pension tax could destroy the dreams of retired British expats hoping to move to Australia.

This is a pension tax warning for those retiring to Australia, and we are issuing it now so that you have as much time as possible to plan ahead and prepare your finances to protect yourself and your very hard-earned retirement income from the Australian taxman.

There are proposals in place in Australia to effectively tax British retirees moving to live in Australia on temporary resident’s visas up to 55% of their pension pot.  Would-be expats who plan to take their retirement savings with them to Australia and ideally invest them in a qualifying pension scheme within the country such as a highly tax efficient qualifying registered overseas pension scheme, (or QROPS), are likely to instead have to place funds in the Australian government’s superannuation scheme if they take the money into the country with them.

According to Adrian Grove, director of Abbey Financial Solutions, this would be the equivalent of taxing Brits upwards of 55% on their pension pot.  Speaking exclusively to us at Shelter Offshore, Adrian Grove explained the situation further for our readers: -

“The plans are at a consultative stage in Australia at the moment, but the general consensus of professional opinion is that they will become law.  It is expected the plans will become law by as early as the end of 2008, and yes, they will effectively mean that any Briton moving to live in Australia on a temporary resident’s visa who naturally wants to take their pension pot with them will face losses, charges and straightforward taxes that could see them lose as much as 55% of their pension pot.

“Many Britons have become excited by widely publicised news about these new overseas pension schemes called QROPS which have full British government backing and which effectively reward those who retire abroad with massive potential tax breaks.  But just as the financial services industry is attempting to get word out about the advantageous schemes, the Australian government comes along and seemingly damns QROPS for anyone retiring ‘down under’.  What I would say to anyone thinking about retiring abroad to Australia or anywhere else for that matter is take professional advice about your retirement savings and take that advice as soon as possible.  There are often ways to structure finances carefully, effectively and legally to reduce taxation, maximise flexibility, enhance diversification and make pension pots grow rather than shrink.”

We absolutely concur on the final point with Adrian Grove from Abbey Financial Solutions and would like to add that there are ways Britons retiring abroad can potentially enhance their retirement savings – and one of the best starting points is examining the appropriateness or otherwise of QROPS on an individual basis.  For a plain English, no nonsense guide to these new qualifying registered overseas pension schemes that could potentially allow you to save significant tax on your pension pot and possibly even avoid the newly proposed Australian superannuation problem, we recommend you download the free QROPS guide from http://www.QROPSguide.com

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