Provident/Preservation fund and Formal emigration

[Erik]

Hi All

Just a quick question about provident/preservation funds

I understand that you can't get your RAs out of RSA without formally emigrating, but Provident funds are governed differently, right?

So if you already made your once in a lifetime withdrawal from a provident fund, do you then need to formally emigrate to get the rest out?

BUT what I really want to know is:

How do I not pay tax on withdrawing my provident preservation fund?

Will I be taxed no matter what,

or won't I be taxed if I'm formally emigrated?...

Someone should write a 101 steps (or maybe 1001?) to formal emigrating.

Thanks

Erik

[StevePorter]

Hi Erik

I hope life downunder is treating you well!

To help in terms of your retirement funding in SA please note:

Retirement annuities: to surrender an "RA" you must place your formal emigration on record with the SA Reserve Bank. This is a fiscal process that effectively changes your status from resident to non-resident, from an exchange control perspective. Your insurer cannot surrender an RA until you evidence your emigrant status. Formal (or financial) emigration does not affect your SA citizenship, your birthright or your right to retain a South African passport. Depending upon your personal circumstances (you, and your family) there may be additional benefits from, or the need to, formally emigrate.

Preservation fund: you can withdraw from a preservation fund without emigrant status, however you are limited to one withdrawal prior to retirement. If you have made a withdrawal you will need to speak to a financial planner as there are a couple of options open to you, to access the remainder. Timing plays a part here.

When you withdraw from any pension vehicle in South Africa, prior to retirement age, you will pay tax; this is unfortunately unavoidable. Financially emigrating does not change this situation. You must also consider the potential tax implications in Australia if you introduce pension funding as a lump sum; the length of time you have been a tax resident in Australia, relative to the length of time the policy has been in existence, remain the key factors in determining whether there is any additional liability over and above that in South Africa.

If you would like to drop a line to steve@cashkows.com with your contact details, I will arrange for you to speak with one of our international financial planners in order to establish the facts and make the right decisions. We do not charge for an initial consultation.

Regards

Steve Porter

Director

www.cashkows.com

FSP # 42872

Tel: 00 27 28 312 2764 / 0027 72 810 0315

Skype: steve.cashkows

[Elliottdean]

Hi Steve

if you take out your RA (by way of declaring yourself as a non-resident) does this mean you cant keep your RSA life insurance policies?

[Happymigrant]

Hi Steve

if you take out your RA (by way of declaring yourself as a non-resident) does this mean you cant keep your RSA life insurance policies?

You can keep your life insurance in SA, but in comparison it was just 30% cheaper for me to take out new policies in Oz. We also do not pay death taxes or estate duties in Oz...

[StevePorter]

Hi Elliott

Apologies for the delay in getting back to you - I've been on the road in the UK meeting with some of the many South African expats.

You can indeed retain your life policies, however as "Happymigrant" points out it is worth getting a comparative quote in Australia as the same level of cover can be significantly cheaper than it is in SA. This will of course be dependent upon when you initiated the existing policy.

Something you also need to consider with a life policy is how the beneficiary will access the proceeds if, God forbid, anything should happen to you.

You're welcome to drop me a line at steve@cashkows.com with your details and I'll be happy to call and explain.

Regards,

Steve Porter

cashkows.com

[Classicman]

Hi

I have heard that if you are a registered tax payer in Australia, you can claim back your tax loss on your pension transfer from RSA in Australia at the end of your current tax year. Is this possible?

[StevePorter]

Hi ClassicMan

Unfortunately you can't claim back, from the ATO, tax paid in SA upon lump sum withdrawals from insurance products.

If you need any help in this regard please feel free to drop me a line at steve@cashkows.com with your contact details and I'll call you.

Kind regards,

Steve Porter

cashkows.com

[Gerhardk]

Classicman, are you maybe referring to a capital loss as a result of the depreciation of the ZAR vs AUD? So at the time you became a Australian Tax Resident (full not temporary) you bring all your assets at market value (deemed acquisition) with you and this forms the cost base.

By way of example, when you became an Australian Tax resident, you had R700k in pension at exchange rate 7:1 so $100k of assets 'came' with you. Say it grew by 10% per annum for 3 years so roughly worth R932k after 3 years. When you convert / withdrew this and turned it into cash, so disposed the asset, at exchange rate 10:1 you received $93k. So you made a $7k capital loss?