Irish resident over 70 with an Australian Superannuation

[Brendan Burgess]

A friend of mine asked this question.

He is Irish and worked for some years in Australia where he built up a Superannuation fund which has the equivalent of about €100k in it.

This is my summary from: https://www.australiansuper.com/superannuation/how-is-super-taxed
1) His contributions to the fund were out of taxed income - i.e. he got no tax relief on contributions.
2) His employer's contributions were taxed at 15%. So, if his employer put in €100, they paid €15 to Revenue and put €85 in the fund. (The tax could have been higher than 15% if the amounts were large.)
3) The growth within the fund was taxed at 15%.
4) Once he hit 60, any further growth was tax-free.

As he is over 60, if he were in Australia, he can take out some or all of this money tax-free.

He is in Ireland and intends to stay here.

So if he takes some or all of this money, he will pay no Irish tax on it.

Tax in Ireland on foreign pensions can be tricky

Drawdowns from an Australian superannuation fund in retirement appear to be exempt from normal tax on income in Ireland

www.irishtimes.com

According to Revenue’s Tax and Duty Manual, which guides its approach to taxation, “Section 200 of the Taxes Consolidation Act (TCA) 1997 provides for a tax exemption for certain foreign occupational and social security pensions.

“Where these pensions are disregarded for income tax purposes in the hands of a resident of the country of source, they are also disregarded for income tax purposes in this State, provided the country of source has a similar income tax system to Ireland,” the tax and duty manual says.

Is there any uncertainty about this? Does he need to take professional tax advice or is it clear-cut - he can take some or all of the money to Ireland and pay no tax on it.

 

[Brendan Burgess]

Ah, I see @TomEdison has answered the question here

Irish State Pension & Australian State Pension

Hi Guys, So I worked in Australia for 7 years. Over there they have a more advanced version of the Auto Enrollment scheme we have here called Superannuation. I have approx 100k in this fund. So in Oz if the fund is withdrawn over the age of 60 as an income stream then it is Tax Free froman Oz...

www.askaboutmoney.com

 

[Brendan Burgess]

A good tax adviser would know how to find out if the Revenue already have a position on whether income taken from an Australian super fund benefits from the s. 200 exemption.

Surely there should be a list of countries which Revenue has decided have a similar Income Tax system to ours for this purpose.

 

[Brendan Burgess]

This very good article implies that Australian Superannuation schemes have been deemed by Revenue to be exempt.

The Taxation of Foreign Pensions in Ireland | LIA

LIA offers a range of Financial Services courses ranging from Level 7 to Level 9 on the National Framework of Qualifications.

www.lia.ie

This can be a very useful exemption where Irish individuals who have been living abroad for several years return to Ireland to retire. It is key to determine if the foreign pension would have been exempt from income tax in the foreign jurisdiction, had it been received by the person as a resident of that foreign country. In practice, this exemption has been seen to operate in Ireland on pension payments from Australia, Switzerland and US Roth IRAs, where payments have been received by Irish residents.

 

[Brendan Burgess]

As he is over 60, if he were in Australia, he can take out some or all of this money tax-free.

Does he have to actually do something? Move the fund from an accumulator account to a retirement account?

 

[Eng_Girl]

Hi Brendan,

I would have started the other thread which TomEdison commented on and it was an eye opener.


Great article on the LIA; Having read the LIA link you put up the below is taken extract is present and oringinally obtained from TCA 200,

"03. The country in which the pension, benefit or allowance arises has a tax which is chargeable and payable under the law of that country, and which corresponds to income tax in Ireland. "


As there is no tax payable on super in Oz when the fund is matured would this mean that the Super fund would not be exempt here in Ireland. (hope to be wrong here) this is what Co-Pilot did flag as a issue. Appreciate AI makes mistakes but seems to be a valid observation none the less

 

[Brendan Burgess]

This legal and tax language can be hard to decipher.

But it can be summarised as "If the country...has a tax...which corresponds to income tax... but the pension payments are tax-free... then the pension payments in Ireland will be tax-free"

So the test is if they have a tax similar to our Income Tax and Australian does have a similar tax, so it passes this test.

I would be very confident that payments from an Australian Super which are tax-free in Australia are also tax-free when paid to an Irish resident.

Having said that, I would like Revenue to confirm this generally or specifically to an Irish resident with an Australian super.

 

[TomEdison]

As there is no tax payable on super in Oz when the fund is matured would this mean that the Super fund would not be exempt here in Ireland. (hope to be wrong here)

I think you (and Co-Pilot) are wrong, you'll be glad to hear.

Test no. 3 is that the foreign country, in general, has an income tax (which of course Australia does).

Test no. 4 is that this particular pension, received by a resident of that country, would be exempt from the income tax.

Test no 3 is included because there are some countries - not very many - that don't levy income tax at all, so naturally in those countries pensions aren't taxed. Ireland doesn't want to give a tax exemption in that case.

The thinking here is that countries that (a) have an income tax, but (b) don't apply that tax to pensions do this mainly because the pension has been funded out of taxed income. That's the case in Australia - pension contributions are subject to 15% income tax, and investment income within the fund is also taxed at 15%. So if Australia then subjected the pension to income tax when it came out of the fund, they'd actually be taxing it twice., meaning the worker would have been better off not putting contributions into the fund in the first place. By not taxing the pension coming out, Australia basically taxes pensions at a flat rate of 15%, which isn't as advantageous as the Irish system but is better than no tax concessions at all.

Ireland reckons that, given all this, it would be unfair of Ireland to tax a pension coming out of the fund that had already been taxed by Australia going into the fund, so we don't tax it.