RA (GEPF)

[Wessmuts]

We have a GEPF retirement fund and at resignation it can be transferred to an approved RA in south africa or paid out in cash, called a gratuity and then taxed. There is no real penalty, apart from the tax. Tax has to be paid at some point wether it is now or when you take the pension at retirement. I obviously don't want to be taxed twice on the same money though. The package in AUS consists of a 30k AUD a year super. I am taking a 20 year view. 

 

We will maintain a financial presence in SA as we have some assets here that need to be serviced and maintained

 

My options are

1. Transfer money into a south african RA and hope the higher interest rate outperforms the weakening rand
2. Take the cash payout (pay the tax) and invest it with an offshore bank who might be able to get me better performance than aus
3. Make a voluntary additional lump sum payment into an aussie super (we are talking about roughtly 150k AUD)

 

I have taken alot of advice and the problem is that south african advisors obviously need to believe that the SA economy will weather the storms and they all seem to think leaving it here and achieving a 8-10% growth a year is a good idea.

Aussie advisors are from my bank and take a very institutional view and feel 4% growth is good enough.

 

I understand I cannot ask advice here, but perhaps some of you have made this choice and can advise on how it worked out and if you would have done it differently or perhaps you made a good choice

 

Thanks in advance for any thoughs

[Hugo2]

Good day

 

You should not go to RA - if you do that you need to formally emigrate to exit funds. Go into Preservation Fund as that preserve pension fund rules ie you can resign if you wish

 

I can only comment from a SA tax and Excon perspective, I do not consider growth and returns

 

To outperform Oz investments you must be pretty sure the Rand will stay the same. From currency and Excon risk I would suggest take out and this will result in tax as you suggested

 

The Preservation Fund and RA fund in SA may be ATO taxable on an annual basis which means you pay Oz tax during investment period which you can't claim as tax credit in SA. SA does not tax retirement fund during membership but do ensure ATO does NOT tax the SA funds as a FIF. Foreign Investment Fund

 

Do note that I understand that if you now create a new FIF they will no longer tax you but please ensure you have correct ATO rules, as I am not an ATO specialist

 

See the repeal of the rules in https://www.ato.gov.au/Forms/Foreign-income-return-form-guide-2017/

 

I also understand now that FIF may not be applicable, on eventual withdrawal, as a lump sum, you will face ATO taxes but reduced by SA tax credits

 

From an Excon point: Lump sum net of tax is part of your FIA R1m or R10m

 

Once you 55 and receive monthly or annual pension benefit it can flow out of SA, no Excon restriction (ie not part of FIA) and not subject to tax clearance

 

I hope this guides you

 

 

[RYLC]

We cashed ours out, paid the tax and used it to buy our first house in Oz. We didn’t believe that growth in an RSA fund would offset rand devaluation and nearly 2 decades later it has turned out best that we brought the funds to Oz. 

 

If your long term plan is permanency in Oz then you have to think to the end game of whether RSA will have/allow currency payouts to offshore policy holders. Zimbabwe froze pensions because they couldn’t fund the payments in foreign currency. A relative left Zim in the 80’s with his decent sized retirement investment left invested to avoid the “heavy” tax. Now decades later at pension stage he can’t access his funds as they are frozen (and barely worth the equivalent of a monthly steak dinner in US dollars).  For this reason we decided to pay the tax on our payout and get the money in hand rather.

 

So my vote was to move money while it was still possible. Doesn’t have to be Oz. Just somewhere off shore. 

Edited June 20, 2018 by RYLC

[LM17]

Hi there, I cant give advise, but after lots of research and chatting with mates  we are taking the following view: 

 

Ultimately you want to bulk of our assets where you live and plan to retire (no forex risk , rate of return and inflation is aligned)

So we are paying the tax (you end up paying tax at a higher rate vs waiting for retirement) you can check out the different tables on the SARS website

then we are investing in AUD Managed funds: -  in this lump sum we have "ringfenced" funds for retirement (hopefully we can retain what we withdrew from our SA Prof funds) this we will pay into a super after 1 to 2 years:  Investing in Super: Upside you get good tax breaks - down side money stuck in there until you are 60 (that's why we decided to keep our money in managed fund for 1-2 years...to make sure we don't need it for house or other expenses)

 

I have been chatting with a financial adviser in Aus to help us set up the managed funds - they charge upfront fees but the local knowledge if something we lack.

 

now for the million dollar question when do you pull the trigger and take your hard savings over--- the ZAR is at 10.13 now -- will it pull back to 9.50, to 9, will it go out to 11 or 12 again?...no one really knows

 

hope this helps a bit.

 

[RYLC]

Also your option 3 might be an issue as contributions are capped at $25k per year. There is scope to “catch up” as a one off but you’ll need specialist advice on what the limits are. 

[RYLC]

2 minutes ago, LM17 said:

until you are 60

 

The age has crept up to around 65 or 67 now. 

[Wessmuts]

9 minutes ago, LM17 said:

Hi there, I cant give advise, but after lots of research and chatting with mates  we are taking the following view: 

 

Ultimately you want to bulk of our assets where you live and plan to retire (no forex risk , rate of return and inflation is aligned)

So we are paying the tax (you end up paying tax at a higher rate vs waiting for retirement) you can check out the different tables on the SARS website

then we are investing in AUD Managed funds: -  in this lump sum we have "ringfenced" funds for retirement (hopefully we can retain what we withdrew from our SA Prof funds) this we will pay into a super after 1 to 2 years:  Investing in Super: Upside you get good tax breaks - down side money stuck in there until you are 60 (that's why we decided to keep our money in managed fund for 1-2 years...to make sure we don't need it for house or other expenses)

 

I have been chatting with a financial adviser in Aus to help us set up the managed funds - they charge upfront fees but the local knowledge if something we lack.

 

now for the million dollar question when do you pull the trigger and take your hard savings over--- the ZAR is at 10.13 now -- will it pull back to 9.50, to 9, will it go out to 11 or 12 again?...no one really knows

 

hope this helps a bit.

 

With my luck, every single thing i have had to pay has been when the rand is crap and when it is stronger i had no aus expenses🙈🙈

[LM17]

19 minutes ago, Wessmuts said:

With my luck, every single thing i have had to pay has been when the rand is crap and when it is stronger i had no aus expenses🙈🙈

same here; paid for 189 VISA when  rand was 11.50 ....