Non-US Investing • Australian financial planning advice (inc 401K and UK pension)

No connection to Australia, so no experience or inside knowledge, but a couple of comments below ...

Me: 47, Aus/UK citizen
$390K Aus super
£200K in UK pension

Having looked at QROPS in the past, I've concluded (perhaps as you have) that it is a bit of a minefield. There may be occasions where it it worthwhile, but I've struggled to identify much in the way of benefit. It used to be that you could use it to dodge under the pensions 'lifetime allowance' if you held pensions that were closing in on that, but the govt scrapped this silly rule just over a year ago ... not, of course, that a future one might reinstate it, or even create something worse, later on.

What are the Australian tax ramifications of holding the UK pension? UK/Australia tax treaty article 17 seems relatively clear on who can tax your UK pension (taxable only in Australia), but doesn't say anything about when. Will Australia allow it to grow unmolested, and tax only withdrawals? If yes, that seems relatively benign, certainly not something worth the effort and upheaval of QROPS.

Spouse: 54, Aus/UK/US citizen
$220K Aus super
£80K UK pension
USD430K in 401K

Same answer as above for Australian tax (or not) on the UK pension. Also, broadly on the US pension; again, the relevant treaty says Australia may tax a US pension, but nothing about when.

US citizenship here is where things start to turn ugly, courtesy of the US's almost unique citizenship based tax policy.

UK pensions are relatively well covered in the US/UK tax treaty, but the US reporting side of things can be complex, even if not actually US taxable annually. Is it a 'foreign trust', leading to a requirement for annual 3520 and 3520-A filing? Reportable on FBAR? Form 8938? When it comes to withdrawals, the treaty restricts this to country of residence (normal), but the US overrides this for US citizens with its 'saving clause'. Taxable to both countries then, with credits required to avoid double-tax.

Australian super plans fare even worse under US tax rules:

Problem – Let's Fix the Australia/US Tax Treaty!

Australia legislated mandatory retirement savings for employees with the Superannuation Guarantee (Administration) Act (1992) and the Superannuation Industry (Supervision) Act (1993). Unfortunately, the US does not recognise superannuation as a qualified tax-deferred retirement plan. While the US tax rules in this area are complex, the US will generally tax contributions and either current income inside super or a portion of withdrawals from super.

So gains inside the plan can be taxable annually to the US, and contributions may not be tax-deductible. Not a happy situation.

- Home worth about $3M, mortgage $1M of which $650K is offset or in redraw.

Joint ownership with your US citizen wife? If yes, watch out for US tax on capital gains on sale (including any 'phantom' gains from currency effects), and also US tax on mortgage repayments.

Statistics: Posted by TedSwippet — Sun Jun 23, 2024 4:52 am — Replies 1 — Views 200

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