Australia is a popular destination for South Africans looking to immigrate to a country where they can enjoy good weather and an outdoor lifestyle similar to the one they are leaving behind in South Africa. The one thing many South Africans worry about is what their tax situation will be like in Australia and more specifically if their South African annuity benefits will be taxed in Australia. In this article we explore what is involved in transferring your retirement annuities (RA) to Australia when you emigrate from South Africa.

Cash in your SA retirement annuities before you turn 55

When you are living abroad in Australia or any other country, you are entitled to cash in your retirement annuities, once you have formalised your financial emigration, even before you turn 55! These funds are then transferred abroad as part of your foreign capital allowance.

Is financial emigration necessary?

Many South Africans who are currently living abroad in Australia have left South Africa without recording their financial emigration. If you want to access your retirement annuity prior to the age of 55, you will have to financially emigrate and meet all the administrative requirements involved with this.

Accessing your South African RA post retirement

If you have already reached retirement age in Australia, the post-tax lump sum can be transferred to Australia as part of your foreign capital allowance. If you are receiving a monthly income, you can receive the income abroad (after tax) but the underlying capital will need to remain in South Africa.

Will financial emigration change your South African tax resident status?

Financial emigration is the process where you change your residency status – for exchange control purposes – from resident to non-resident, which has no bearing on your South African tax resident status.

How are retirement annuities taxed?

You will not need to pay any Australian tax on your RA, however you will need to pay tax in South Africa on the lump sum at the point of withdrawal. The income tax payable on the lump sum is determined by applying a tax table specific to retirement fund withdrawals, which is contained in the Second Schedule to the Income Tax Act. The larger the lump sum, the higher the tax bracket and tax rate that is payable.

Do you need to withdrawal all your RAs at one time?

If you have decided to withdraw a South African RA while living in Australia, there is no rule that forces you to withdrawal from all funds if you hold more than one retirement annuity. Instead, you can action withdrawals when it suits you. This is particularly useful when you have already used your emigration allowance for the given year.

If you are a South African living or moving abroad and would like to know more about how you can maximise your finances through financial emigration from South Africa, accessing your South African retirement annuity and our tailor-made tax solutions for South Africans around the world, contact FinGlobal today.