John is a senior executive of a multinational firm, soon to return home to Australia after an assignment in the UK. His employer paid for his exit-tax advice out of Australia and funded his entry-tax advice into the UK some years later. He did not receive any pensions or investment advice, and he needs it now.
If anything, he has more financial planning concerns than general tax ones. These relate to the intended sale of his recently let primary UK residence, several cash deposits and the question of when he should transfer his pensions from the UK to Australia.
Prior to his departure from Australia and relocation to the UK, John received the contracted exit meeting with an Australian tax adviser to discuss general exit-tax matters relating to Australian capital gains and income tax. John received the equivalent when he arrived in the UK from his UK tax adviser, including the completion of his tax returns during his assignment.
As part of the exit-tax service, the appointed UK tax adviser completed John’s last tax return post-departure from the UK (he was then an Australian tax resident). John was further entitled to a meeting with the appointed Australian tax adviser, as an entry-tax service, to discuss general Australian taxation matters.
John was at a disadvantage because he had not received advice tailored to his situation before. Neither of his tax advisers delved into his personal finances, and their lack of interaction had the potential to lead to catastrophic consequences.
As a result, John did not realise any wealth accumulated outside Australia would fall outside his employer’s service specifications. John was subsequently unable to set out his aims.
John’s tax disaster was averted by engaging a specialist cross-border adviser who considered his UK residence. Months prior to leaving the UK, John let his property by a two-year tenancy agreement that ceased after his return to Australia. John had planned to sell, but did not because a significant Australian tax charge would have triggered if the property sale and tenancy term took place in the same Australian tax year. As a result, the property sale was postponed to the following Australian tax year.
Currency exchange fluctuations also caused a potential AUD $520,000 (£284,745) paper gain on John’s mortgage value, likely to be considered an assessable-tax income by the Australian Tax Office (ATO). Uncertainty surrounding John’s taxation position resulted in insufficient time for a tax ruling from the ATO. Furthermore, John’s UK and Australian tax advisers did not interact or look into his personal circumstances prior to his departure from the UK.
When it came to pensions, John’s pension portfolio and any overseas transfers should have been structured with tax efficiency and by a combination of both Sipps and qualifying recognised pension schemes. John’s new cross-border experts recommended an Australian superannuation scheme, funded progressively from a UK Sipp, and structured for an Australian resident.
John’s financial situation was also improved by a reduction in his tax-assessable income. The efficient timing of John transferring cash deposits after his arrival in Australia and currency exchange rates indicated a total loss of £46,545, and subsequent reduction in his tax-assessable income.
Geraint Davies is founder and managing director at Montfort