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Tax query - provident fund


snakey

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Hi all,

Have quite a specific tax query below. Hoping someone may have dealt with a similar problem or know of a useful contact.

I have a South African provident fund that I would like to withdraw from and move the funds across to Aus.

I am due an annual bonus at the end of Feb 2016 which has a provident component. We are however moving across in August this year. I can therefore only withdraw the funds next year.

I have been advised that I will be liable for Aussie tax on top of the SA tax due for the full provident fund amount, as post August this year I will be regarded as an Aussie tax payer.

Has anyone had this issue? Seems unfair as all the income earned was while I was SA tax resident!

Thanks in advance for the help :)

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Would like to know too,seniors please help.

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Hi all,

Have quite a specific tax query below. Hoping someone may have dealt with a similar problem or know of a useful contact.

I have a South African provident fund that I would like to withdraw from and move the funds across to Aus.

I am due an annual bonus at the end of Feb 2016 which has a provident component. We are however moving across in August this year. I can therefore only withdraw the funds next year.

I have been advised that I will be liable for Aussie tax on top of the SA tax due for the full provident fund amount, as post August this year I will be regarded as an Aussie tax payer.

Has anyone had this issue? Seems unfair as all the income earned was while I was SA tax resident!

Thanks in advance for the help :)

As far as I know, you only need to pay tax in one country, which will be the country of residence. I suggest you contact Exchange4Free and get their advice. They are excellent. Another company that deals with those kind of queries is Cashkows, but I have not dealt with them personally, just read about them on the forums.

As far as I know, you only need to pay tax in one country, which will be the country of residence. I suggest you contact Exchange4Free and get their advice. They are excellent. Another company that deals with those kind of queries is Cashkows, but I have not dealt with them personally, just read about them on the forums.

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I went through this with an RAF.

This is a very complex part of Australian tax law and you will be best to get expert tax advice. And try find someone who has gone though one of these before. This forum is not expert tax advise.

You will be given a credit by the ATO for any taxes paid in South Africa, so you will not be taxed twice

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You get taxed in South Africa at ~18% (but depends on the amount and the SARS tax directive)

In Australia you have to declare it as an income. That will then be taxed at your marginal tax rate. However you will get credit for the tax you paid in RSA.

Edited by ottg
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  • 3 weeks later...

Hi all,

Finally received some guidance from EY, please see below for anyone interested:

Effectively if received within 6 months there should be no issues. If post 6 months they will probably tax you on the growth from the tax residency date to the receipt date.

Generally, if a lump sum payment from a foreign superannuation fund is received within 6 months of commencing Australian tax residency, there should be no tax on the payment provided lump sum amount relates solely to a period you were a non resident of Australia for tax purposes and the lump sum amount does not exceed the amount vested to you when the payment is made. That said, without reviewing the documents for your South African provident fund, we cannot confirm whether your South African fund the Africa meets the definition of a foreign superannuation fund for Australian tax purposes.

If the lump sum payment is paid to you more than 6 months after you have commenced Australian tax residency, Australian will likely apply to any growth on your “applicable fund earnings” in your South African Provident Fund from the time you became an Australian tax resident and when the lump sum was received. This will be at your marginal tax rate if the lump sum is paid to you directly or potentially at 15% or 30% if you elected for your lump sum to be paid directly into an Australian superannuation fund.

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  • 2 weeks later...

Hi Guys

Thought I would add my comments here in the hope that it will help!

When you surrender any type of pension product in full you will pay tax in South Africa - fact. The amount of tax you pay is calculated in accordance with the table below but note that it is applied on a cumulative basis:

R0.00 to R25 000.00 0%

R25 001.00 to R660 000.00 18% of taxable income in excess of R25 000.00

R660 001.00 to R990 000.00 R114 300.00 +27% of taxable income in excess of R660 000.00

R990 001.00 and above R203 400.00 +36% of taxable income in excess of R990 000.00

For example, if you made a withdrawal of R700,000.00 previously from a provident fund and now withdraw R250,000.00 from a further pension product you'll be taxed at 27%.

As there is a double taxation agreement in place between South Africa and Australia you will not pay tax twice - the ATO will allow you a credit for tax paid to SARS. If however the liability in Australia exceeds the amount of tax you have paid in South Africa you will be liable for the difference. The growth of your investment between the date you became an Australian resident and the date of surrender will determine your tax liability. This does then beg the question .... if you're going to transfer your pension investments should you not do it sooner rather than later and avoid the risk of a liability arising in Australia?

It's perhaps worth mentioning here that if you continue to contribute to a pension product in South Africa whilst tax resident in Australia and you don't claim relief from the ATO you'll pay less tax to SARS if you surrender the product.

This can be quite a complex area and the decision to surrender a pension product of any sort should only be made once you are fully informed. You'll need to consider the exchange rate, the tax situation in both countries, pension legislation and of course exchange control - that's a lot to take on board!!

If you have any questions relating to this topic or exchange control in general feel free to mail me at steve@cashkows.com

Regards,

Steve Porter

Director

cashkows.com

Edited by Steve Porter
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