HMRC Attacks UK Pension Transfers to Australian QROPS
HMRC may close around 40% of Australian super qrops schemes due to a technicality. Many British expats or Aussies who have transferred may be hit by a 55% unauthorised tax charge.
HMRC have decided to go after large Australian superannuation funds that are on HMRC’s QROPS list. Australian law allows can allow access before the age of 55 in certain circumstances.
HMRC have asked these huge superannuation schemes in Australia to change Australian law governing them. If the Aussies don’t amend their pension regulations to accommodate HMRC rules, any Brits who have transferred into these Aussie Super QROPS approved pensions will face a 55% tax charge.
HMRC sent the schemes a letter recently on 17th April and concerns all transfers after the 6th of April this year.
Australian Super Pension Schemes Need to Change Their Trust Deed to Become QROPS Compliant
HMRC want to see the Australian pension rules changed, so that Australia prohibits access before the age of 55 or that the scheme rules have been amended to ensure they do not allow funds to be withdrawn before members reach this age unless due to severe ill health, in line with laws in the UK.
But, this is unlikely to happen as the number of Brits in these huge schemes is a drop in the ocean. So, what we are more likely to see is nothing, which means HMRC could impose a 55% tax charge for an unauthorised transfer.
If the trust deed of these Australian schemes weren’t amended before the 6th April, then payments are unauthorised in the eyes of the Inland Revenue.
40% of QROPS Australian Super Pension Schemes Could Be Closed to British Pension Transfers
The FTAdviser has already looked at the Australian QROPS list that HMRC has put out and found 1,670 Australian pension schemes which would be affected by the rules change. 40 per cent of the pension schemes on the list could fail this rule.
We will see in the coming months which QROPS trustees in Australia will continue to function and which ones can or even want to amend the rules. Most of these schemes have mainly Australian members.
Other QROPS Options Besides an Australian QROPS Pension Transfer
For British expats who haven’t transferred a pension to Australia yet, but are considering moving to Australia, they may want to think about transferring their pension to a QROPS in Malta or the Isle of Man instead. Both of these countries have a Double Taxation Agreement with Australia with the added bonus of being more flexible if you ever want to return to live in the UK, Europe or somewhere else in the world. In other cases, a UK SIPP may be a good option as well. Each case will have its own merits. Talk to a QROPS specialist for advice.HMRC to Close Around 40% of Australian QROPS Schemes by Richard Malpass