Amounts transferred from foreign funds

Transferring to Australia

A member can transfer their interest or entitlement in a foreign fund to an Australian superannuation fund. They may pay income tax on this transfer but only on the applicable fund earnings. The applicable fund earnings are, in general terms, the earnings on the member’s foreign super interest that accrued:

• since they became an Australian resident, or
• from when they terminated their foreign employment until the transfer takes place.

If they complete the transfer within 6 months of meeting the conditions above, the applicable fund earnings will be nil.

A member can elect to include the applicable fund earnings in the assessable income of their Australian superannuation fund as an alternative to paying income tax on the amount themselves. To make this election they must either:

• complete and give you the form Choice to have your Australian fund pay tax on a foreign super transfer (NAT 11724)
• provide the same information in a form you give them.

Your reporting obligations

All amounts received from a foreign fund transfer (other than a KiwiSaver scheme) are contributions (according to the ordinary meaning discussed in taxation ruling TR 2010/1) and must be reported.

There are 3 possible components for other foreign fund transfers which are not KiwiSaver schemes:

• applicable fund earnings (elected)
• excess foreign fund amount
• non-assessable foreign fund amounts

Applicable fund earnings (elected)

This is the amount the member has chosen to include in the assessable income of their provider (shown at section D, question 17 on the form Choice to have your Australian fund pay tax on a foreign super transfer (NAT 11724). You should report this field as nil if the member did not make this choice.

Excess foreign fund amount

This is the difference between:

• the amount in the foreign fund vested in the member at the time the foreign transfer occurs
• the amount actually transferred to the Australian superannuation fund by the foreign fund.

This difference can arise, for example, when a foreign employer allocates an additional discretionary payment to the member as a golden handshake or in recognition of years of service.

Generally, foreign fund earnings are regarded as vested in the member, even if they are not calculated and applied to the member’s account until the transfer occurs, even if earnings won’t be applied to other members' accounts until a later date.

You should be careful not to confuse the excess foreign fund amount with the amount the member chooses to include in your fund’s assessable income.

Non-assessable foreign fund amounts

This is the entire foreign fund transfer amount less:

• any amounts included in the field excess foreign fund amount
• any amounts included in the field applicable fund earnings (elected).

This amount often makes up most of a foreign fund transfer.

Transfers from KiwiSaver Schemes

Transfers from KiwiSaver Schemes under trans-Tasman portability arrangements are not treated the same as other foreign fund transfers. There are different rules for deciding which part of the transfer should be included.

There are 3 possible components of a transfer from a KiwiSaver Scheme:

• any amounts that are Australian sourced amounts returning to Australia (that have previously been reported by an Australian superannuation fund) should not be reported
• any amounts that are New Zealand-sourced amounts that were previously transferred to Australia and are now returning from New Zealand should not be reported as these have previously been reported by an Australian superannuation fund
• the remainder of the KiwiSaver tax-free transferred amount should be reported at non-assessable foreign fund amounts. This will be treated as a non-concessional contribution and count towards the member’s non-concessional cap.

You should not accept these transfers from New Zealand unless you have built systems and processes to allow you to do so, including to:

• store details of KiwiSaver tax-free components, and pass these details to other providers with a rollover
• comply with the regulatory rules that apply to these components (such as no rollovers to SMSFs and preservation of New Zealand-sourced amounts until age 65)
• comply with the tax rules that apply when these amounts are paid to the member as a benefit
• report the KiwiSaver tax-free amount when first transferred from New Zealand.

Transfers from reserves

Generally, all amounts transferred or allocated from reserves should be reported as either assessable or non-assessable amounts. The meaning of assessable and non-assessable is provided within the ordinary meaning of contributions (as provided in taxation ruling TR 2010/1).

Examples of where allocations from reserves are generally not reported as assessable amounts include:

• amounts allocated to all, or to a class of members to which the reserve relates, on a fair and reasonable basis
• amounts allocated for the sole purpose of discharging super income stream liabilities that are currently payable
• allocations following the commutation of a pension, where the amount in the reserve is allocated to a member who is the primary beneficiary of the pension and it is used to support another income stream for that member.