Superannuation money stuck in Australia

[William415]

Here's another interesting situation ... not sure if anyone can help. I have a (rather large) pot of Superannuation money stuck in Australia - I cannot take it out early unless I give up my Australian passport. I will be taking out British citizenship soon (I have recently become eligible) and renouncing my Australian citizenship and returning my AU passport. This means I have no rights to return to OZ, and can withdraw my Superannuation money (less 35% tax).

 

I've contacted my Super fund to ask about the procedures on how to do this. They sent me a form with instructions, that says I must go through the ATO (Australian Tax Office). Once the ATO gives the OK, then the Super fund will release the money.

 

Here's my problem: I owe some back taxes to the ATO that I cannot afford to pay ... I'm wondering if they can somehow intercept the release of my Superannuation money to satisfy the outstanding tax debt.

 

Anyone know?

 

Thanks.

 

W.

[cerberusalert]

Here's my problem: I owe some back taxes to the ATO that I cannot afford to pay ... I'm wondering if they can somehow intercept the release of my Superannuation money to satisfy the outstanding tax debt.

I would assume that any tax you pay on your superannuation will alert the tax office that you have funds & they'll most probably pursue for payment. Whether they can take it directly I don't know but they would more than likely take the legal route & possibly garnishee your funds.

[William415]

It's weird - from the procedures and looking at the ATO's online application, it appears that the ATO only verifies that I'm no longer an AU resident for tax purposes. Providing your Tax File Number on the ATO application is optional.

 

I'm really worried, because I really need this money to pay off debt here in the UK to get my head above water. I want to be sure the ATO won't confiscate it.

 

From what I remember, Superannuation in Australia is exempt from virtually any liens in order to preserve people's retirement funds.

 

W.

[cerberusalert]

If you ask the question here; http://www.expatfocus.com/index.php?name=Forums&file=viewforum&f=173 maybe someone will know.

[creditcorptrouble]

The ATO are very good at recovering Commonwealth debts, they deducted $150 from my 2007 tax return for a supposed overpayment of Austudy in 2002, shortly after I left the country. I think you are at a substantial risk of the ATO deducting any Commonwealth debts from your super. Have you tried trawling the ATO website - there's bound to be a guidance about this.

[creditcorptrouble]

You might like to go to the ATO website and search the legal database for "Chapter 38 CROSS-BORDER RECOVERY OF TAXATION DEBTS". Your application to withdraw your super will set alarm bells ringing, and if the debt is large enough, the ATO *will* come after you in the UK.

[William415]

I may have to find a lawyer and/or financial planner in Australia who can advise me before I make an attempt to access the money.

 

I am in debt up to my neck here in the UK, and my Super would really help to clear most of it, and put me in much better financial shape. I have built up a very large pension account here in the UK (I contribute quite a large pre-tax amount from my salary, and have a very generous employer match) - so I'm not really worried about not having retirement income.

 

Damn, why is everything SO difficult....?

 

W.

Edited February 17, 2011 by cerberusalert

[creditcorptrouble]

Yes, the pension system in the UK is great, I whacked a whole lot into a pension while working there, and then if you haul it over into your super in Australia within six months of returning, you avoid the 15% Australian tax. What about making a hardship application to the Australian super fund? I do not know whether the ATO gets involved with that, you'll need to seek advice. If the ATO aren't involved then that might be a way to access your Australian super without going through the renouncing citizenship path.

[cerberusalert]

See; http://www.aussielegal.com.au/forum/forum_posts.asp?TID=4976&PID=26827

[William415]

I've been doing more research on this, and the situation seems to be that anyone who leaves Australia (but has the right to return ... either to work, or to retire) can keep their Superannuation in the existing fund and manage it as if you were still there. It is preserved until you reach retirement age, which depends on the year you were born (age 57 in my case).

 

However, if you were in Australia on a TEMPORARY visa that has expired, the Super fund can transfer your retirement savings to the ATO, and the ATO will hang on to it (without earning any returns) and release it to you if you ask.

 

My situation is somewhat complicated, in that I obtained Australian citizenship whilst living in Australia. So long as I remain an Australian citizen, my Super fund is "preserved" until retirement age and I cannot access the money. I could try to access it via a "hardship" request, but I doubt that I would qualify - and even if I did, there is no guarantee I could access the entire amount.

 

So it appears I have two choices: (1) Leave the money there and let it continue to grow until I reach the age in which I can access the money (8 years from now); or (2) Renounce my Australian citizenship after I obtain my UK citizenship, then apply to have the money released (with the risk that the ATO will seize it).

 

I am going to pursue option (2) with the assistance of an Australian tax attorney. This will cost me some legal fees, but it should be worth it since my Super fund is nearly A$50,000. If the attorney is unable to provide me with assurance that the ATO will not sieze the money, then I will leave it in the fund until retirement.

 

I'm hoping I can access it ... even after the 35% penalty tax, it will put a serious dent in my outstanding debts and enable me to pay off the rest pretty quickly. Then I can see about setting up a payment plan to pay off the ATO.

 

My next goal is to find an AU attorney who can advise/assist me - which is somewhat difficult from abroad. If anyone has any suggestions, please let me know.

 

W.

[cerberusalert]

So it appears I have two choices: (1) Leave the money there and let it continue to grow until I reach the age in which I can access the money (8 years from now);

I seem to remember reading somewhere that it can be released when you're 60.

[cerberusalert]

See; http://en.wikipedia.org/wiki/Superannuation_in_Australia

[cerberusalert]

Date of birth Preservation age

Before 1 July 1960 55

1 July 1960 – 30 June 1961 56

1 July 1961 – 30 June 1962 57

1 July 1962 – 30 June 1963 58

1 July 1963 – 30 June 1964 59

After 30 June 1964 60

[William415]

The preservation age actually varies depending on the year in which you were born:

 

Before 1 July 1960: 55

1 July 1960 - 30 June 1961: 56

1 July 1961 - 30 June 1962: 57

1 July 1962 - 30 June 1963: 58

1 July 1963 - 30 June 1964: 59

From 1 July 1964: 60

 

http://www.ato.gov.au/super/content.asp?doc=/content/60489.htm&page=9&H9

[cerberusalert]

In your case then it's 55.

[William415]

I was born near the end of 1961, so in my case age 57.

[cerberusalert]

Only a couple of years then.

[William415]

I have made contact with a solicitor in Australia who has agreed to assist me in this matter. They specialise in tax and superannuation matters. They estimate the fees will be 5 hours of work at A$450/hour - total A$2,250.

 

I have explained my situation in detail, and have asked them THREE times if they think the ATO is likely to seize my super if I attempt to withdraw it. They have not answered my question, which makes me suspicious.

 

I would think they would reply with something like: "We believe the ATO is likely to seize your funds because .... bla bla bla .... and in our experience this happens ... bla bla bla." But they are silent on the matter - they just say they will assist me for an estimated fee of A$2,250.

 

I estimate that - after tax - I would have access to A$26,000 of super funds but would have to pay legal fees of ~9% of that.

 

I'm not sure what to do ... I can't find anyone that can tell me the likelihood of the ATO seizing the money. It could be that the ATO doesn't even check on any taxes due, and simply verifies that I am no longer a resident/citizen. Or, maybe that's WHY the ATO needs to provide approval for withdrawal of Super ... to make sure no outstanding taxes are due.

 

SOMEONE HELP!!

 

W.

[cerberusalert]

Try asking the tax question on http://www.expatfocus.com/index.php?name=Forums&file=viewforum&f=173 someone there might know.

[William415]

Try asking the tax question on http://www.expatfocus.com/index.php?name=Forums&file=viewforum&f=173 someone there might know.

 

Yes, I have done that ... I made a post on 16-Feb, and nobody has yet responded.

[cerberusalert]

I can't think of anywhere else I'm sorry.

[bazaar]

IMHO, I wouldnt be parting with any money to a solisitor firm charging 450 an hour?? What if their estimate is wrong and they suddenly say 'oh we now have to charge this because' Youre leaving yourself open to losing a heck of a lot.

If the ATO are gonna charge you, then thats what theyll do, why pay extra

[creditcorptrouble]

It's a curly one. The ATO has far reaching powers to withhold monies on behalf of itself and government departments. I think you may be able to avoid it by perhaps entering into a payment arrangement that's over three or four years, and then in two, pull out your super and then stop making payments? Sounds dodgy I know but I would have thought that if you are under a payment arrangement they wouldn't raid your super, especially if you whack it into an annuity so it never really gets into your hands?

[creditcorptrouble]

$450 an hour is about the going rate for a decent tax lawyer. I doubt they'll give you any guarantees. How much tax is owing?