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I have been working in Australia for several years, with a temporary residence visa. I expect to soon be returning to my home country (UK). At this point, my superannuation account will be closed, taxed, and the balance returned to me as a lump sum. I have no choice about this.

What is the most effective way to make use of this money, given that it represents a significant fraction of my current retirement fund? The two main options appear to be:

  1. Immediately deposit it into a UK pension fund or other investment vehicle earmarked as retirement savings; or
  2. Use the lump sum to reduce my mortgage, and then increase my regular pension contributions to reflect the reduction in monthly mortgage payments.

I think (2) is the most cost-effective strategy, as it significantly reduces the total interest I pay on the mortgage. Am I missing anything?

5

Consult a professional to see if there are alternatives to paying the tax.

For example in Canada if you leave the country you could transfer the balance to a different pension account and avoid paying tax on it. You would have to pay tax on it eventually, but in the meantime it would accrue tax free interest. I don't know if such a thing is possible in Australia but checking with a professional could well be worth it.

EDIT:To be clear (because of the comments) I don't just mean look for a way to transfer the money to the UK (which may well exist) but also way way to transfer the money to another fund in Australia without paying tax. You might then be able to get it back at some future point without tax.

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  • Thanks. Unfortunately I am fairly confident that there are no alternative options. – user99788 Jul 4 at 23:14
  • @user99788 Got a reference to back that confidence up? Perhaps there's something you missed. Another set of eyeballs might help. – Chris W. Rea Jul 4 at 23:27
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    @ChrisW.Rea See ato.gov.au/individuals/international-tax-for-individuals/…. There are special rules for New Zealand, but otherwise there is no way to access the money without the Australian government taxing it. This is backed up by many Google results for "Tranfer Australian Super to UK", e.g. the second FAQ at exfin.com/australian-expat-tax-faqs. – user99788 Jul 4 at 23:36
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    @user99788 both those links say you can access the DASP, not that you must. Is there some other rule that forces you to do it? – GS - Apologise to Monica Jul 5 at 0:25
  • @GS-ApologisetoMonica ato.gov.au/individuals/super/in-detail/… If you do nothing, your account gets closed automatically and the government sits on the money until you do access DASP. – user99788 Jul 5 at 0:38

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