Transfer from a foreign super fund to an Australian super fund

Example: applicable fund earnings transferred after 6 months

Leonard grew up overseas and contributed to a retirement savings scheme in his home country. He emigrated to Australia and became an Australian resident for tax purposes in September 2018. At that time, the value of his super interest was the equivalent of A$300,000.

In May 2019, Leonard decided to transfer the balance of his foreign super fund to his Australian super fund. The value of his super interest was then $400,000, so his applicable fund earnings were $100,000. He is required to declare this amount in his tax return or in his fund’s assessable income.

However, had Leonard transferred the amount within 6 months of becoming an Australian resident, none of the amount would be treated as applicable fund earnings.

Example: applicable fund earnings and assessable income

Tony transfers $160,000 from his foreign super fund to his Australian super fund. The transfer is the whole of his interest in his foreign fund. His applicable fund earnings amount is $40,000. If Tony doesn't elect to include any of this amount in his Australian super fund's assessable income, he must include the $40,000 in his personal assessable income for the year (taxed at his marginal tax rates).

If Tony elects to include $30,000 of the applicable fund earnings in his fund’s assessable income, his fund will include this amount in its assessable income (taxed at 15%) and he must include $10,000 in his personal assessable income (taxed at his marginal tax rate).

If Tony elects to include $40,000 of the applicable fund earnings in his fund’s assessable income, his fund will include this amount in its assessable income (taxed at 15%) and Tony won't have to include any of the applicable fund earnings in his personal assessable income.

Example: assessable component of the transfer from foreign fund

When John arranged for a transfer from his foreign super fund to his Australian super fund, his account balance was A$300,000. However, John's foreign employer allocated to him an additional $75,000 as a discretionary payment in recognition of his years of service. The additional $75,000 is the assessable component of the total transfer amount of $375,000.

Example: choosing the amount of applicable fund earnings to include in your fund's assessable income

Marianne, 62, transferred $420,000 from her foreign super fund to her complying Australian super fund in 2018–19, several years after she became resident in Australia.

• Marianne had given her TFN to her fund when she opened her account.
• As she is 62 years old, her fund does not have to confirm that she meets the work test before accepting the contribution.

The transfer consisted of:

• $400,000 which was vested in her at the time of the transfer, of which $50,000 was applicable fund earnings
• $20,000 which her foreign employer added to her account balance at the time of the transfer as a discretionary payment.

There are three options available to Marianne.

Option 1

Marianne decides not to include any of the applicable fund earnings in her super fund’s assessable income.

Her fund reports:

• $400,000 as the Non-assessable foreign fund amount
• $20,000 as the Assessable foreign fund amount
• $420,000 as Total contributions.

Income tax

• Marianne must include $50,000 applicable fund earnings in her personal assessable income for the year and pay tax on the amount at her marginal tax rates.
• The fund must include $20,000 in its assessable income for the year and pay tax on the amount at 15%.

Excess contributions

• $400,000 is counted towards Marianne’s non-concessional contributions cap (which is $300,000 for the year).
• $20,000 is counted towards Marianne’s concessional contributions cap (which is $27,500 for the year).
• When Marianne's fund reports the foreign fund transfer she will be issued with an excess non-concessional contributions determination and the excess may be subject to additional tax.

Option 2

Marianne chooses to include all of the applicable fund earnings in her super fund’s assessable income.

Her fund reports:

• $350,000 as the Non-assessable foreign fund amount
• $20,000 as the Assessable foreign fund amount
• $420,000 at Total contributions.

Income tax

• Marianne does not include any amount of the transfer in her personal assessable income for the year, as she had elected for the full amount of her applicable fund earnings to be included in the fund's assessable income.
• The fund must include $70,000 ($20,000 + $50,000) in its assessable income for the year and pay tax on the amount at 15%.

Excess contributions

• $350,000 is counted towards Marianne’s non-concessional contributions.
• $20,000 is counted towards Marianne’s concessional contributions.
• The $50,000 does not count towards either her concessional or non-concessional contributions.

Option 3

Marianne chooses to include $30,000 of her applicable fund earnings in her super fund’s assessable income.

Her fund reports:

• $370,000 as the Non-assessable foreign fund amount
• $20,000 as the Assessable foreign fund amount
• $420,000 as Total contributions.

Income tax

• Marianne must include $20,000 (her applicable fund earnings of $50,000 less the $30,000 she has elected to include in the fund's assessable income) in her personal assessable income for the year and pay tax on the amount at her marginal tax rates.
• The fund must include $50,000 ($20,000 + $30,000) in its assessable income for the year and pay tax on the amount at 15%.

Excess contributions tax

• $350,000 is counted towards Marianne’s non-concessional contributions.
• $20,000 is counted towards Marianne’s concessional contributions.
• The $30,000 does not count towards either her concessional or non-concessional contributions.