Ask Melanie

Calling all retiring types: make sure your superannuation fund stays super

Melanie Nutbeam, a certified financial planner based in Hong Kong, addresses common personal finance queries. Send your questions to

PUBLISHED : Monday, 04 February, 2013, 12:00am
UPDATED : Monday, 04 February, 2013, 4:33am

We plan to retire to Australia in five to 10 years. Should we transfer our monthly surplus to an Australian superannuation fund so we don't pay as much tax when we're there?

Yes, transferring retirement capital to a superannuation fund can be a highly effective strategy for anyone retiring to Australia. Income tax rates stand to be cut from as much as 46.5 per cent to nil.

Advance planning harvests maximum benefits. That's because the transfer of capital to a superannuation fund has age and work-based eligibility requirements and annual contribution limits. Basically, anyone under 65 and working can transfer A$150,000 (HK$1.2 million) to their superannuation fund each tax year (ending June 30), tax-free. Alternatively, A$450,000 can be contributed prospectively for a three-year period. That's per adult taxpayer so a husband and wife could contribute A$300,000 per annum, or A$900,000 in one hit to cover the next three years. If your annual allowance isn't used, it's lost.

You can choose the fund and the most convenient is usually a public offer fund where your account is separate but administration and compliance costs are shared across all fund members.

Wide underlying investment choice is available across asset classes and global markets. Earnings you achieve within the fund will be determined by returns on your investment choices and the costs of running the fund. Income and gains from investment of your capital will be taxed within the fund at up to 15 per cent but careful management can reduce this to about 5 per cent per annum. This minor tax niggle stands as a small insurance premium against otherwise potentially hefty taxes later.

Your assets (member benefits) remain your own within the fund and a nomination of beneficiaries notification can be lodged to ensure fund trustees pay all benefits to your beneficiaries or estate, on death.

You should only transfer retirement capital to your superannuation account as, once transferred, full withdrawals can only be made from your fund on retiring after age 60. At that stage, you can draw a pension or lump sum virtually tax free. Retiring to Australia and paying no tax is certainly achievable dependent on your total wealth and the extent to which you have progressively used your annual contribution limits.

The greatest risks are finding you need the money for something else, and the possibility that the government pulls back the tax breaks given to the plans. The government wants to encourage people to save for retirement, so it offers tax breaks - with conditions. Contribution limits, tax within the fund, and withdrawal restrictions have all been altered from time to time. It's prudent to stay informed about the direction of government tax policies on such plans.

The Gillard government has just announced it intends cutting back some of the tax concessions for high-income earners, which might make it sensible for those offshore to put money in sooner.

Your adviser will be able to assess the extent to which you should use the strategy of contribution to superannuation against other strategies, for example, paying down a mortgage.

Some people ask whether contributing to a superannuation fund while not a resident of Australia will compromise their non-resident tax status or get them "caught up in the Australian tax net". It generally does not although this is something to review with your adviser.

If you do not already have an Australian superannuation fund, an account within a public offer fund can be set up quite easily, but it's contingent on obtaining an Australian tax file number. All nationalities are eligible and the most difficult part is the inconvenience of trotting down to Wan Chai to obtain a sign off on the application from someone at the Australian consulate.

The views presented are of a general nature. For specific advice, talk to a professional planner. See the column archive at