Trivedi & Awasthi (No 2)
[2022] FedCFamC1F 555
Federal Circuit and Family Court of Australia
(DIVISION 1)
Trivedi & Awasthi (No 2) [2022] FedCFamC1F 555
File number(s): SYC 5604 of 2010 Judgment of: BAUMANN J Date of judgment: 4 August 2022 Catchwords: FAMILY LAW – PROPERTY – Where further submissions have been received as to a form of order to achieve a just and equitable division of the husband’s future entitlement under a United Kingdom based pension scheme – Issues of enforceability – Order made for appointment of a Pensions Transfer Specialist to provide a report as to the suitability of the husband’s fund to be transferred to a complying Australian superannuation fund Legislation: Family Law Act 1975 (Cth) Division: Division 1 First Instance Number of paragraphs: 15 Date of hearing: 18 May 2022 Place: Brisbane Counsel for the Applicant: Mr Dura Solicitor for the Applicant: Horton Rhodes Legal Counsel for the Respondent: Mr Givney Solicitor for the Respondent: Zraika Partners Lawyers ORDERS
SYC 5604 of 2010 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 1)
BETWEEN: MS TRIVEDI
Applicant
AND: MR AWASTHI
Respondent
order made by:
BAUMANN J
DATE OF ORDER:
4 August 2022
THE COURT ORDERS:
1.That Mr EE of FF & GG Limited be appointed as a single expert pursuant to Rule 7.04 of the Federal Circuit and Family Court of Australia (Family Law) Rules 2021 to provide a report as to the suitability of the husband’s G Company Staff Fund to be transferred to a complying Australian superannuation fund, on the following conditions:
(a)The parties shall share equally in the costs of the single expert;
(b)The parties shall provide such further information to the single expert, as he may reasonably require, to assess whether transfer approval would be given, within seven (7) days of such request;
(c)If required by the single expert, the husband shall nominate a complying Australian superannuation fund to be the potential recipient of the husband’s entitlements if approval for transfer is given by the UK authorised Pensions Transfer Specialist. The term “complying” means both a fund established and complying with Australian law, but also a qualifying recognised overseas pension scheme under United Kingdom law; and
(d)Each party shall, at their sole cost, have liberty to provide a copy of the report from the Mr EE to Mr D for further advice and a report.
2.That these proceedings be listed for Case Management Hearing at 9.30am on 7 September 2022 in the Federal Circuit and Family Court of Australia at Brisbane.
3.That the parties have leave to appear by telephone on 7 September 2022 by using the Microsoft Teams conferencing system as follows:
(a)They shall click the below link (if accessing this Order electronically) to join the Microsoft Teams conferencing system, by 9.25am on 7 September 2022; or
(b)They shall each telephone ... by 9.25am on 7 September 2022;
(c)They shall each then enter the pass code ...; and
(d)Hold the line until the Court is ready to connect and proceed with the matter.
Note: The form of the order is subject to the entry in the Court’s records.
Note: This copy of the Court’s Reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 10.14(b) Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 10.13 Federal Circuit and Family Court of Australia (Family Law) Rules 2021 (Cth).
Section 121 of the Family Law Act 1975 (Cth) makes it an offence, except in very limited circumstances, to publish proceedings that identify persons, associated persons, or witnesses involved in family law proceedings.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Trivedi & Awasthi has been approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
REASONS FOR JUDGMENT
BAUMANN J:
After delivering reasons in this matter on 25 November 2021, further submissions have been made by the parties (both orally and in writing) in perfecting a form of order which reflects the intention of the Court to share in a just and equitable manner, the husband’s future entitlement under the G Company Pension Scheme, based in the United Kingdom.
In respect of the other interests of the parties identified in the pool (see Appendix One to the Reasons published on 25 November 2021), the subsequent Order made 25 January 2022 provided that the husband pay to the wife the sum of $201,906.90 (less one half of the fees paid by the husband to Mr D). That payment has been made, so that what remains to be the subject of final orders, is how to deal with the G Company Pension entitlement.
That issue is beset with complexity, first traversed in the report of Court expert Mr D, and further discussed by the expert in an additional report prepared by Mr D (filed 18 March 2022) in compliance with directions made 25 January 2022.
The position and proposals of the parties now appear to be as follows.
The wife
Relying upon the further Report of Mr D and the further affidavit of the wife filed 14 March 2022, the wife submits that:
(a)the wife opposes the husband’s proposal that the husband be permitted to elect to take his entitlements in the G Company Pension Scheme (“the scheme”) as an annual pension and that he will, during his lifetime, pay 50% of the net pension paid to the wife;
(b)the wife says that her opposition to the husband’s proposal is based on at least the following reasons:
(i)The difficulties in enforcing an Australian order when the expert opines it is not possible to register an order in the United Kingdom to bind the husband and the scheme Trustees;
(ii)the wife does not wish to be “financially connected to Mr Awasthi” for another 20 or 30 years, and when one of the parties die, the rights of the estate of the deceased and the surviving former spouse are uncertain;
(iii)upon turning 65 in 2023, it is estimated the husband will be entitled to receive an annual pension of GBP 21, 613 (approximately AUD $40,000) but how any receipt by the wife will be taxed is in contention; and
(iv)As a result of the wife’s financial position, she says she has “very little practical utility for regular small cash payments from Mr Awasthi”.
After considering the options identified by Mr D’s report (see report and wife’s summary at paragraph 11 of her affidavit filed 14 March 2022), the wife’s preference is to adopt what Mr D expresses to be “by far the most tax effective way to achieve the split” of the Fund. This requires the value of the Fund to be “repatriated” to Australia such that adjustments and splitting orders can be made in Australia and enforceable in Australia. The wife estimates equality of receiving 50% of an estimated $784,000 can then be achieved in accordance with the Court’s expressed intentions.
To effect the wife’s proposal, she seeks the Court make the further orders attached to these reasons as Appendix One. Counsel for the wife contends (and Counsel for husband conceded in his written submissions dated 17 May 2022) that it is within the power of the Court to put into effect the recommendations by the single expert and the orders at Appendix One.
Husband
Relying upon his affidavits filed 21 March 2022 and 16 May 2022, when summarising below the husband’s reasons for opposing the wife’s proposal, it bears recalling that these parties separated over 14 years ago and returned to live permanently (at that time) in Australia with their two sons, in 2003. As a result of the husband’s cessation of employment with G Company (UK) as a finance professional in September 2002, his then accrued entitlements in the Scheme effectively lied dormant only to be given close attention because of the property proceedings in Australia, and more urgently, the critical date for election of his interests on his 65th birthday in 2023. Also, as my earlier Reasons set out, these parties have no ongoing trust or respect for each other, and virtually no communication between them exists. In all these circumstances, it is hardly surprising that they see the way forward with the G Company Pension Scheme entitlements, entirely from their own personal perspectives.
The husband’s reasons for adopting his proposal include:
(a)the husband fundamentally seeks to retain a pension entitlement in the United Kingdom, which can be equally divided with the wife. The husband contends this is easily achieved by making the order he proposes, which is Appendix Two to these Reasons.
(b)on 16 May 2022, the husband received a letter of advice from a “Pension Transfer Specialist” Mr EE of FF & GG Limited, which concludes with the following summary:
Transferring a UK Defined Benefit pension is very heavily regulated and complex even within the UK. The complexities are magnified further, when benefits are subject to the separating matrimonial assets, and still more when an international transfer is being considered. This is a complex, lengthy, costly and time consuming process which will take many months to resolve:
1. If there are DB benefits, advice from a UK Authorised Pension Transfer Specialist will be required to effect any transfer out of the DB scheme.
2. The advice may ultimately be not to transfer. Neither the scheme member nor the Australian Family Court can instruct the UK authorised adviser to effect a transfer if a ‘no transfer’ recommendation is made and the adviser is unprepared to work with insistent clients (note that FF will not undertake a transfer for an insistent client as an example).
3. There will be an ongoing requirement for advice from a UK pensions firm for both parties (and possibly separately in Australia) if they want to transfer their share to their own Super Fund in Australia (which also needs to be [sic] meet UK regulatory requirements) in the most tax efficient manner.
4. Some UK pension scheme rules stipulate a transfer is only an option up to the Normal Retirement Date – usually age 65. Late retirement is not always permitted. In such cases, any transfer would have to be completed before the pension member reaches age 65. Thereafter, there will be no flexibility on division of any benefits, as the UK income stream will be fixed for life. Such may be the case with regards to the defined benefits scheme under consideration.
(c)the husband contends that the single expert Mr D “did not refer to the necessity of a pension transfer specialist being appointed to assess the suitability of transferring out of the defined benefit scheme with G Company.” The husband is correct in this assertion; and
(d)one of the motivating factors for the husband’s preference is that as he has “no reasonable contact with our children and as such little ties to Australia”, he is considering returning to live in the United Kingdom, and as such, a periodic pension would be of more benefit to him. The husband concedes that his proposal “causes issues relating to enforcement.”
Discussion
If it had been possible, amongst Australian based interests to adjust for the future entitlements the husband will receive (however he elects to take those entitlements) within the Australian interests, the Court would have done so.
Whilst I appreciate the estrangement between the husband and his two sons weighs heavily upon his attitude, it is my view that the enforcement issues are so problematic that it is just and equitable to make orders ultimately that seek to repatriate the husband’s entitlements to an Australian fund.
This way, at least some reasonable and enforceable finality for both parties can be achieved. It also seems to me, subject to the advice of the Pension Transfer Specialist, that if the entitlements are amenable to orders of this Court, then a range of “splitting orders” and access to the superannuation benefits then existing can be shaped – even with the husband’s 50% interest in any superannuation fund accessible to him by way of a tax free “pension” – being superannuation in its payment phase.
I accept, however, that if the Pension Transfer Specialist who I will appoint now, will not support a transfer the specialist under the UK system having significant powers, then there seems little option other than to look at ways in which the wife’s entitlement to the G Company Pension Scheme, through the husband, can be arranged.
The Court has decided to appoint Mr EE of FF & GG Limited as a single expert, at the joint expense of the parties, because he already has some background in respect of the matter, but the firm also has offices in Australia.
Accordingly, at this time, I make the further orders set out at the commencement of these Reasons.
I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Baumann. Associate:
Dated: 4 August 2022
APPENDIX ONE
RECITAL
A.On 25 November 2021, the Court delivered Judgment and published Reasons to the effect that the Husband’s interest in the G Company Pension Scheme is to be equally divided between the parties.
B.These orders are now made with the intention that the net value of the G Company Pension Scheme will be shared equally between the parties.
C.It is noted that, if the Cash Equivalent Transfer Value in respect of the Husband’s interest in the G Company Pension Scheme is not transferred to the Super Fund 11 (as defined in these Orders) by 8 February 2023, the parties may not be able to implement these Orders. In this regard, time is of the essence insofar as these Orders require the Husband to do certain acts.
The Court Orders:
1.That the Husband is to do all things that are necessary, as quickly as practically possible:
(a)To transfer his pension benefits in the G Company Pension Scheme (the Pension) as described in the “most straightforward transfer plan” set out in Annex 6 (updated) (also known as Option (d)) to the expert’s report of Mr D dated 21 August 2020 as updated on 24 February 2022 (a copy of which is Annexed hereto and marked “A”), with a view to completing the transfer in the tax year 2021/22. For the avoidance of doubt, the steps set out in Annex 6 (updated) have full force and effect as Orders of this Court; and
(b)To get into a position to enable the payment to the Wife referred to at Orders 12 to 15 below to be made.
So as to implement the effect of Order 1 and Recital B above:
2.Within 7 days of the date of these Orders:
(a)The Husband is to appoint a pension transfer adviser (Adviser) to act in relation to the transfer of the Pension as set out at Annex 6 (updated) with instructions to the Adviser that all steps in the transfer of the Pension are to be completed such that the funds received are available in Australia before 30 June 2022;
(b)The Husband is to provide a copy of these Orders to the Adviser;
(c)The Husband is to provide an irrevocable authority and direction to the Adviser to provide the Wife or her solicitors any information which is requested in writing, from time to time, regarding the status of the transfer;
3.That in the event that the Husband fails, refuses or neglects to comply with Order 2 by the due date, the Wife shall appoint an Adviser and provide the Husband’s Solicitors with the details and particulars of the Adviser. The Husband will be liable for all costs associated with the appointment.
4.The Husband is to respond to and provide all documents, authority/ies or information requested by the Adviser within 7 days of such request being made in writing;
5.Within 7 days of any request by the Adviser, the Husband is to do all things and sign all documents necessary to open an account in a receiving fund (also known as a Qualifying Recognised Overseas Pensions Scheme) with the receiving fund to be: Super Fund 11 as a Division in the Super Fund 12, of which DD Trustees Limited is trustee (Super Fund 11) and for the purpose of this Order, the receiving fund is to be an account-based pension (retirement phase pension) and the Husband is to ensure that all funds held by the Super Fund 11 are held in cash deposits until after these Orders are implemented.
6.The Husband is to do all things required within 7 days of any such request in writing from the Adviser to engage and obtain safeguarded benefits advice from a UK licensed Independent Financial Adviser (IFA) from the IFA recommended by the Adviser. The IFA is to be instructed to provide such advice as a matter of urgency and the Husband provide the IFA an irrevocable authority and direction to provide Ms Trivedi or her solicitors any information which is requested in writing, from time to time regarding the status of the transfer. The Husband is to provide the Wife a copy of the irrevocable authority and direction given to the IFA.
7.The Husband do all things required to instruct the Adviser, upon receipt of the safeguarded benefits advice from the IFA, which the Husband will cause to be provided by the IFA to the Adviser forthwith upon his receipt of same, to complete the transfer of the Pension/Cash Equivalent Transfer Value to cause the whole of the Cash Equivalent Transfer Value to be made to the Super Fund 11.
8.That forthwith upon receipt into the Super Fund 11, the UK sourced Pension money is to be put in “drawdown” and to be left in “drawdown” until the implementation of these Orders have taken place.
9.It is noted that at the end of the tax year in which the transfer of the Pension to the Super Fund 11 took place, the Super Fund 11 reports the receipt of the Pension to the Australian Taxation Office (ATO). The Husband must telephone and write to the Super Fund 11 on 1 July 2022 requesting that the Super Fund 11 makes the required report to the ATO as a matter of urgency and on 1 July 2022, the Husband is to provide the Super Fund 11 a copy of these Orders.
10.It is noted that, following the report by SUPER FUND 11 to the ATO, referred to at Order 9, the ATO will issue the Husband with an excess non-concessional contribution determination and the Husband is to do all things forthwith upon receipt of the determination to cause the release of the amount shown on the determination to the ATO and, within 7 days of receipt of the determination, the Husband is to provide the ATO with a copy of these Orders.
11.It is noted that the Super Fund 11 will release the amount shown on the determination to the ATO and the Husband is to do all things and sign all documents forthwith upon receipt of confirmation from the ATO regarding the ATO’s receipt of the amount to cause that amount to be released by the ATO and paid to the Wife, as directed by the Wife’s solicitors in writing.
12.If the ATO fails to pay the Wife or her solicitors in accordance with the request form or otherwise makes the payment required in the above order to the Husband, then the Husband must immediately make the payment required in the above order to the Wife or her solicitors.
13.That from the money received from the ATO, as referred to in Annex 6 and Orders 10 to 12 above, or otherwise, and if necessary, topped up by the Husband, the Husband shall ensure that an amount is paid to the Wife equal to 50% of:
(a)The amount of the transfer of all his pension benefits in the G Company Pension Scheme converted to Australian dollars either at the exchange rate achieved on the transfer or if the amount transferred was kept in pounds sterling, at the spot rate published by the RBA for the day the transfer was received by the receiving scheme;
Less
(b)The tax paid on the Applicable Fund Earnings in the transfer
Less
(c)The tax paid on the Associated Earnings
Less
(d)The lesser of the total fees paid to achieve the transfer as set out in Annex 6 (updated) and to deal with the resulting tax and reporting obligations, or $40,000.
14.That the Husband shall ensure that the amount set out at Order 12 above is paid to the Wife as referred to at Orders 1 to 13 above, with the balance of the amount owing to the Wife is to be paid to her by way of a superannuation splitting Order and the parties will do all things and sign all documents necessary to obtain a trustee’s consent and to vary these Order and to otherwise obtain further orders such that a superannuation splitting Order is made to the effect of the form of Order annexed hereto and marked “B”, by way of the parties writing to the Associate of Baumann J seeking for Orders to be made in Chambers. AND, it is noted that the Wife has obtained a trustee’s consent in relation to the annexed form of Orders, subject to the dollar figure included in the form of Order being available in the Husband’s super fund at that time.
15.The Husband shall give authority to any adviser who is engaged with respect to the transfer or the reporting of the transfer to HMRC or to the ATO to respond to the Wife or her solicitors on request as to progress with the transfer.
16.The Husband or his solicitor shall report to the Wife’s solicitors as to progress with the transfer at the following stages:
(a)The obtaining of a new Cash Equivalent Transfer Value (CETV) (providing a copy of the CETV).
(b)The receipt of the safeguarded benefits advice. The establishment of the transfer plan.
(c)The actual transfer, giving the amount transferred.
(d)The lodgement of the receiving fund’s return (the receiving fund is to be the Super Fund 11 as a Division in the Super Fund 12 of which DD Trustees Limited is trustee) to the ATO showing that there has been a contribution above the non- concessional contribution cap.
(e)The receipt of the excess non-concessional contribution determination. The payment of the receiving fund on the release authority.
(f)The receipt from the ATO of the money in step 12 as referred to in Annex 6.
17.Liberty to both parties to apply on three days’ notice to the Associate to Baumann J as to the implementation of these orders.
Annexure “A”
ANNEX 6 (UPDATED)
Plan of transfer to the Australian superannuation regime
This annex is updated to reflect a fresh Cash Equivalent Transfer Value (CETV) document attached to a letter from G Company pension administrators and dated 30 November 2021, changes to Australian tax and changes to fees.
Please note that Mr Awasthi’s transfer option from the G Company scheme is only available before early 2023 when he turns 65.
Factual basis for this transfer plan
Mr Awasthi was born in 1958 and so is aged
6264.
The KPMG CETV is £466,010 (at an exchange rate of 1.83, this is $852,798).The G Company CETV is £457,585 (at an exchange rate of 1.89, this is $864,836).Mr Awasthi joined the scheme in mid 1987, having started with G Company in late 1985, and left the scheme in late 2002.
Mr Awasthi became an Australian tax resident in 2003 and he has not reverted to UK tax residency since then. He is undecided whether he will remain an Australian tax resident for the next six years.
Mr Awasthi has no Australian superannuation interests containing Australian sourced money.
His likely marginal tax rate in Australia in tax year 2020/21 and in subsequent years is likely to be nil. He says he has no clients and is unlikely to have any for the foreseeable future.
Most straightforward transfer plan
This is to transfer the whole of the CETV to an Australian QROPS. The only freely available Australian QROPS is currently Super Fund 11 This is a retail superannuation fund. An alternative would be for Mr Awasthi to establish his own Self Managed Superannuation Fund and obtain QROPS status for it with Her Majesty’s Revenue and Customs. This can be done fairly easily and cheaply.
The Australian tax and superannuation consequences of the transfer result from the fact that:
(a)The receipt is treated for tax as a lump sum received from a foreign superannuation fund and therefore the taxable growth in the lump sum since Mr Awasthi became an Australian tax resident is assessable to tax. This growth is called the Applicable Fund Earnings or AFE. For a discussion about the AFE see Annex 4.
(b)Tax is payable on the AFE by the receiving fund at 15%.
(c)The receipt is treated for superannuation purposes as a non-concessional contribution into the Australian superannuation fund. This has consequences in so far as the lump sum exceeds the non-concessional contribution cap. If the receiving fund pays the tax on the AFE then (to that extent) the AFE does not count towards the cap. Since 1 July 2017 a superannuation fund has been able to receive one or more contributions which exceed the cap.
(d)The amount by which the contribution exceeds the cap, plus an extra amount to allow for tax, will need to be released back to the member by the receiving fund. However, this will not happen until the ATO issues a release authority.
(e)The member must pay tax on the “Associated Earnings”. This is a notional amount which it is assumed the receiving fund could have earned on the amount in the fund which should not have been there.
As can be seen from the above, there are certain complexities arising from a transfer of UK pension money which exceed the cap. It is however now standard practice, and most pension transfer specialists do it
although there are some pension transferspecialists who do not do it. Transfers exceeding the cap as a matter of course have been necessitated by two things. Firstly the reductions in the non-concessional contribution cap on 1 July 2017 from $180,000 per annum (and $540,000 using the bring forward rule) to $100,000 per annum (and $300,000 using the bring forward rule), now increased to $110,000 (and $330,000 using the bring forward rule), and secondly the high CETVs caused by extremely low UK interest rates in the past.The steps in the transfer
Step 1
-
Mr Awasthi would appoint a pension transfer adviser to undertake the transfer
Step 2
-
(If necessary) the adviser would ask the G Company Staff Pension scheme for an updated CETV
Step 3
-
Having calculated the Applicable Fund Earnings or obtained tax advice about this, the adviser would establish a transfer plan and arrange for an account to be opened in a receiving fund (a QROPS) or for a new Self Managed Superannuation Fund to be established and obtain QROPS status
Step 4
-
The adviser would engage a UK licensed Independent Financial Adviser (IFA) to give Mr Awasthi safeguarded benefits advice
Step 5
-
The adviser would ensure that the transfer forms are completed and cause the transfer of the whole of the new CETV to be made into the Australian QROPS
Step 6
--
Immediately on receipt the UK sourced pension money would be put into “drawdown”. The easiest way to do this is by starting an account based pension (retirement phase pension) with the money. From the answers to my questionnaire it can be seen that Mr Awasthi would be able to do this under Australian rules because he is over 60 and “retired”.
Step 7
At the end of the tax year in which the transfer was done, the receiving fund reports the receipt of the UK pension money to the ATO
Step 8
-
Soon after step 7, the ATO issues Mr Awasthi with an excess non-concessional contribution determination
Step 9
-
Mr Awasthi chooses to release from the scheme the amount shown on the determination
Step 10
-
The ATO send to the receiving scheme a release authority requiring release of the amount in the determination
Step 11
-
The receiving scheme pays to the ATO the amount in the determination
Step 12
-
The ATO discharges any tax due by Mr Awasthi and pays the remainder to Mr Awasthi
Timescale
Steps 1 to 6 would normally take between 2 and 4 months to achieve.
Steps 7 and 8 would occur in about October in the tax year after the transfer is done. So for example, if Mr Awasthi starts Step 1 in
October 2020April 2022 then step 7 would probably be about early October20212022 and step 8 would belater in October 2021November 2022. Steps 9 to 12 would follow in fairly rapid sequence.There could easily be slippage in these timings, for example if there are queries when preparing the receiving fund’s financial statements or in the audit. Such things might delay the issuing of the non-concessional contribution excess determination.
Tax and fees
No UK tax would arise on this transfer. Briefly, the reason for this is that the transfer would be to a QROPS, which is authorised. Then because of step 6, all receipts from the UK sourced pension money would be “pension”. For an Australian tax resident, “pension” is only taxed in Australia (it is not taxed in the UK).
The tax on the AFE can be assumed to be about $41,606 (see Annex 4).
There would be tax on Associated Earnings. My calculation is very rough because it depends on a number of variables. On my calculations, the excess over the non- concessional contribution cap is $257,460 and the Associated Earnings would be about
$37,500$30,000.ThisThe Associated Earnings would be added to Mr Awasthi’s assessable earnings for the tax year2020/212021/22 (assuming the transfer occurred in that year), but on the basis he has no other income there would be no tax to pay on this.I confirm that there would be no Australian tax to pay on any of the receipts of the UK sourced pension money from the receiving scheme.
As for the fees to pay to achieve the above transfer, I am aware of these from my own experience but I have confirmed the likely fees in this particular case, from a pensions transfer adviser. Unfortunately since my original report, fees for the compulsory safeguarded benefits advice have increased enormously for non-UK residents. The last such fee I saw was £11,000 for a transfer of £900,000 including the SIPP fee. Mr Awasthi is likely to have to pay about £10,000 in such fees.
Fee for new CETV from G Company Staff Pension scheme
$550
Fee for the safeguarded benefits advice from a UK IFA
$3,500
$18,900
Implementation fee
$8,500 to $17,000
Receiving fund fee
$600
Possible establishment fee
$1,500
Additional accountancy and audit fees
$2,000
Allow say, a total of
$16,000 to $25,000$31,500 to $40,000 for fees.Result of the above plan in figures
This should be regarded with caution – see variables below.
Mr Awasthi
would receive into his account in thereceiving scheme after fees, would hold about$830,000$827,000 and the account would pay about$40,500$41,606 in tax on the AFE leaving about$789,500$785,400 in the account.In about
October 2021November 2022 he would receive an excess non-concessional contributions determination of about$365,000$280,000 and a few weeks later this would be removed from the account and paid to the ATO leaving about$424,500$505,400 in the account.
The ATO would take from the
$365,000$280,000 any money it was owed by Mr Awasthi and then in the usual event would pay to Mr Awasthi the remainder.So after the payment to Mr Awasthi by the ATO, on these figures he would have:
(a) a sum of
$424,500$504,400 in his superannuation fund; and(b) a sum of
$365,000$280,000 in his hands.
It would be from these monies that Mr Awasthi could make a payment to Ms Trivedi. A pension splitting order could be made but this would deplete Mr Awasthi’s superannuation fund. Also such an order should not deplete the superannuation fund before the payment of the release authority – see Annex 7 in my original report.
I confirm that the money in (b) would not in any way be restricted or regarded as UK sourced pension money either in the hands of Mr Awasthi or Ms Trivedi because, under UK pension law, it would have been a pension payment to him, and therefore the same as any other money in his hands. Equally any share of the
$365,000$280,000 paid to Ms Trivedi would be free of any tax and free from any UK implications because of its source.On these figures the amount available for a 50% distribution is about $784,000, providing Ms Trivedi with $392,000.
Reporting to Her Majesty’s Customs and Excise
The receiving fund would report the first pension withdrawal to HMRC.
Variables
There are many variables and for this reason it would be better not to have fixed figures in the order.
For example the
new CETVactual amount transferred could be higher or lower, depending on current interest rates, funding of the scheme, and how the post-2000 section has faired.There is considerable uncertainty about the AFE, for which see Annex 4.
Changes in exchange rates could alter the figures considerably.
The fees could vary from those set out above.
The Associated Earnings, and hence the amount of the excess non-concessional contribution determination and the amount which must be released by the fund will vary by the speed with which the ATO is informed of the excess at the end of the transfer year, the speed with which the ATO processes this, and by the General Interest Charge at that time (the notional interest on the money is calculated using the GIC).
Savings in fees
Mr Awasthi could save some fees by doing some of the work involved himself. I do not know whether or not this is feasible. Several of my clients have done this successfully.
Less straightforward transfer plans
There are a some less straightforward transfer plans which could be proposed, involving a transfer to another UK registered pension plan and then possibly staggering the transfers into the Australian superannuation regime in stages.
But in this particular case Mr Awasthi is in a good position to achieve a fairly clean transfer which optimises the amount available. This is because he has a zero marginal rate of tax (which means that the tax on the Associated Earnings will not be much of an issue), and also because he would be able to start an account based pension immediately with the incoming UK sourced pension money (this simplifies the reporting obligation to HMRC greatly).
So detailed consideration of these alternatives would, in my view, on current information, not be warranted.
Overseas transfer charge
Mr Awasthi has said in the answers to the questionnaire that he is undecided whether he will stay in Australia in the long term. He needs to be aware that if he moves away from Australia, a 25% UK tax called the overseas transfer charge would be payable on the amount of the UK sourced pension money from the G Company Staff Pension scheme remaining in his fund at the time of his departure.
He can however, avoid this charge to tax perfectly legitimately by withdrawing the whole amount from his fund before he departs.
As said above, Ms Trivedi’s share of this money would not be tainted in the same way because it would not have come to her by way of transfer from a UK registered pension scheme.
Annexure “B”
Superannuation Splitting Order
1That the Court allocate as required by Section 90XT(1)(a) of the Family Law Act 1975 (Cth) a base amount of $[to be determined] of Mr Awasthi’s (the Husband) superannuation to Ms Trivedi (the Wife) out of the Husband’s interest in the Super Fund 11 as a Division in the Super Fund 12 (the “Fund”).
2That pursuant to Section 90XT(1)(a) of the Family Law Act 1975 (Cth) that whenever a splittable payment becomes payable, in respect of the Husband’s interest in the Fund, the Trustee of the Fund, DD Trustees Limited (the "Trustee"), shall pay to the Wife the amount calculated in accordance with Part 6 of the Family Law (Superannuation) Regulations 2001, using a base amount of $[to be determined] and there should be a corresponding reduction in the entitlement of the person to whom a splittable payment would have been made but for these Orders.
3That the Trustee do all such acts and things and sign all documents as may be necessary to:
3.1Calculate in accordance with the requirements of the Family Law Act 1975 (Cth) and the Family Law (Superannuation) Regulations 2001, the entitlement for the Wife created by Orders 1 and 2 of these Orders; and
3.2Pay the entitlement whenever the Trustee makes a splittable payment out of the Husband’s interest in the Fund.
4That the Trustee do all acts and things and sign all such documents as may be necessary so that in accordance with the obligations set out under the Family Law Act 1975 (Cth) and the Family Law (Superannuation) Regulations 2001, the Trustee can calculate the entitlement of and make payment to the Wife in accordance with Orders 1 to 3 herein.
5That Orders 1 to 4 have effect from the operative time, being four business days after the date of service of a sealed copy of the Orders upon the Trustee.
6Having been afforded procedural fairness in relation to the making of these Orders, Orders 1 to 5 are binding on the Trustee as trustee of the Fund.
APPENDIX TWO
1.NOTED the Court has ordered that the Husband’s UK pension fund with the G Company Pension Scheme is to be divided equally between the parties.
2. To give effect to this Order:
2.1.Order 6 of the Orders made on 25 January 2022 is discharged;
2.2.the Husband shall make an election to the G Company Fund Scheme to receive a pension of the fund;
2.3.the Husband shall ensure that he has an account with a United Kingdom bank; and
2.4.the Husband shall direct the trustees of the fund to pay to this account each pension instalment payable from the fund.
3.The Husband shall within fourteen (14) days of receipt of payment of the Pension instalment, pay one-half of such sum to an account nominated by the Wife.
4.The wife shall pay 50% of any tax levied on the Husband in connection with the pension instalments.
5.That the Husband shall provide to the Wife by text message and email 60 days’ notice of ant intention to leave Australia permanently prior to the purchase of any ticket or such travel either by sea or air.
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