what to do with the provident funds

[MrandMrsK]

HI

I would greatly appreciate any suggestions or advise regarding our provident funds. As we will leave our employment soon, we need to decide what to do with the money. My hubby does not want to touch his money now, as he is approaching 40 and very concerned about his future.

Is there a better way to get the money with paying less tax penalties for getting the money out before retirement age?

Is there some sort of global/international retirement fund where we can transfer our money directly (thus no withdrawl fee) where we can access this in Australia when we retire? I do understand that this means we will not have access to the money now, which needs to be okay if we plan for the future!

Can we put this money directly into an Australian retirement fund to reduce the penalties?

Thanks for the suggestions!

[Hugo2]

MrandMrsK

the destination of the funds makes no difference in SA TAX so using a specific international fund will not reduce tax in SA

In deciding you want to secure your old age, remove to a big extent the tax cost from the decision making. The issue is the currency of choice and your view of the Rand, tax you going to pay, now or int he future, in SA on lump sum or Australia on monthly pension one day

This is where financial planning advice and wealth planning are important and I can't give that, I can only add the tax angle but I want you to lower you aggression against tax, as it is your destiny, tax you will pay. But there is good tax and bad tax

Good tax suggestion: cash in, pay the SA lump sum or resignation tax before the rules change end of 2013. See Treasury page for proposed reform, first R1m may soon be stuck in government social security like fund. Within 6 months of arrival in Ox, transfer tax free in to Superannuation fund. After 6 month cut off you face Ox tax, albeit it little but growing with time. Once day when you retire the ATO tax you at low rates, far lower than their max of 35%. Silent non tax benefit you are in a stronger currency

Bad tax suggestion: Leave in SA, tax free for now. Currency risk to be considered. When you retire, pay SA tax on lump sum, ATO tax on monthly pension. Now this pension is normal income and tax risk is 35% where as Super's annuity would could have been taxed circa 15%. Current government proposal is that the first R1m may not be encashed or commuted and must be left in fund to fund monthly pension as our old age social benefit will soon be part of the private funds and the latter will probably be milked to fund the indigent. Read more about the class action against Trevor and Maria Ramos / Transnet to understand what I fear.No, I am not a fear monger but this is fact.

OK, there is the tax option. Now take this to your advisor in Oz that knows Super's rules AND your SA FP adviser provided he knows ATO/Super rules. If you have none call on Mariette at Cashkows.com on Gold coast or in SA for Janine or Lizette (028 31 22764)for a referral, she has a list of qualifying FP (financial planners)

Feel free to use my name and refer to this post, I will alert them of my thoughts.\

Greetings

hugo ! cashkows.com cross border tax and advisory

[Mikeleigh]

Holy cow this is highway robbery ! Hope all comes through before end of the year so I dont have to leave cash behind !!

[MrandMrsK]

@Hugo, thank you so very much for that explanation! makes so much sense now.

@mikeleigh - I know! i guess you will pay, no matter what!