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International Superannuation and Pension Management |
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OFFSHORE PENSION FUNDS
What is the Fund?
The Fund is an employer-sponsored and maintained retirement fund. For Australian tax purposes, the Fund is an employer sponsored and maintained non-resident non-complying superannuation fund with a Singapore tax resident trustee.
All contributions and injections into the Fund must be for the benefit of defined employees of the sponsoring employer. Employees of the sponsoring employer can include directors of the sponsoring employer or of related entities.
The Fund should be established for the sole purpose of providing for retirement benefits for its beneficiaries.
How are Assets Held?
The employer is admitted to the Fund as a participating employer by way of a Deed of Admission. Upon execution of this deed, a separate sub-fund is created for the nominated employees of the employer.
The sub-fund can be an allocated or discretionary sub-fund. Where the sub-fund is an allocated sub-fund, you have a defined interest in the sub-fund at all times. Where the sub-fund is a discretionary sub-fund, you do not have a defined interest in the sub-fund.
Investments held within each sub-fund are not to be pooled with other sub-funds.
Contributions
The Fund accepts employer and employee contributions for allocated sub-funds but only accepts employer contributions for discretionary sub-funds.
The level of maximum contributions and accumulations of the Fund are generally based on internationally accepted standards with respect to retirement funding.
Investment of Contributions
The members may discuss the investment mandate for the sub-fund with the trustee of the Fund. Should the members have an existing investment manager relationship, this could be maintained by the Fund if the trustee was satisfied that the investment manager was of an appropriate standard.
Members will generally be provided with quarterly statements indicating the performance of the portfolio.
Investments in property, private equity and other assets can also be made by the Fund.
Benefit Payments
It is important to note that the assets held in the Fund will only be able to be withdrawn from the Fund upon a member satisfying specific termination/retirement events. For example, attaining normal retirement age, retiring from the workforce generally, ceasing employment with the sponsoring employer, disability, etc.
The taxing of benefits in the member’s hands will depend on their circumstances at the time of the benefit payment.
Taxation Implications
The member of the Fund should not be subject to tax in Australia on the Fund during the accumulation phase to the extent that the Fund continues to be employer maintained.
The Fund should not be subject to tax in Australia to the extent that it does not derive Australian source income and does not derive capital gains from taxable Australian property.
The trustee of the Fund has obtained advice in relation to the Australian income tax aspects of the Fund. This advice indicates that section 27CAA of the Australian Income Tax Assessment Act 1936 (“the 1936 Act”) will tax Australian resident members on withdrawals from the Fund based on the following formula:
| [ [ | Payment day entitlement |
- [ | Accumulated Entitlement |
+ | Additional Contributions |
] ] x | Resident Days ------------- Total Days |
] + | Previously Exempt Amounts |
Where:
Payment day entitlement means the amount paid/payable from the Fund;
Accumulated entitlement means the amount paid/payable from the Fund immediately before the member attains Australian residency or becomes a member of the Fund;
Additional contribution means payment made to the Fund by a member or an employer of the member;
Resident days means days since the member has been a member of the Fund that they have also be resident in Australia;
Total days means days since the member has been a member of the Fund; and
Previously exempt amounts means transfers to the Fund from another non-resident non-complying superannuation fund that would have been subject to Section 27CAA(1) of the 1936 Act if the transfer had been made to the member instead.
In effect, the member is subject to tax in Australia only on the growth of the Fund whilst the member has been tax resident in Australia.
Any benefits received or payable to members will be assessed to tax in Australia at Australian individual marginal tax rates. Alternatively, a roll over into an Australian complying superannuation fund of the earnings component of the Fund would be subject to tax in the hands of a complying superannuation fund in Australia at 15%.
This information has been prepared in good faith, is in the nature of general comment only, and neither purports, nor is intended, to be advice on any particular matter. You should not act or rely upon any matter or information contained in or implied without taking appropriate professional advice which relates specifically to your particular circumstances. The authors and consultants expressly disclaim all and any liability to any person (whether a reader or not) who acts or fails to act as a consequence of reliance upon the whole or any part of this information.
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