As a result, transfers made into the funds after 6 April risk a penalty tax charge of up to 55%.
However, in a note sent to members last week, the association said HMRC is “considering relief” for transfers completed up until 17 June, the date it sent out a letter to QROPS operators asking them to confirm that their scheme meets the requirements of the “pensions age test”.
Active from 6 April, the pensions age test does not allow benefits to be paid before age 55 other than in cases of “serious ill health”. Australian superannuation funds do not meet this requirement as they also permit the early payment of benefits in cases of “serious financial hardship”.
ASFA said Australian funds should now tell HMRC how many transfers they completed after 6 April so the Revenue and Australian Treasury can begin to organise how the relief process could work.
“ASFA will be urgently arranging a meeting with the Treasury to discuss the best approach for the future, and will continue to keep you informed of any further developments,” the association said.
The note follows a conversation about QROPS between HMRC and the Australian Treasury on 24 June.
Last week, it was announced that HMRC would waive penalties on UK pension transfers into many KiwiSaver schemes made by 17 July, after the New Zealand-based retirement products also lost their QROPS status.
Exemption
Also last week, Martin Hagan, secretary general of the Law Council of Australia, wrote to the Revenue asking for Australian regulated superannuation funds to be provided an exemption under the pensions age test requirements.
He said the Superannuation Committee understands there are frequent transfers from pension funds in the United Kingdom to Australia and that, to date, these have occurred largely without a tax penalty. However, he added that this will no longer be able to occur under the new rules.
“Australian superannuation funds are highly regulated and closely supervised by Commonwealth regulators, including the Australian Prudential Regulation Authority, the Australian Securities and Investments Commission and the Australian Taxation Office,” he said.
“Applied strictly, an Australian regulated superannuation fund will not satisfy the pension age test because of the law of the country in which the fund is established.”
Beggars belie
Geraint Davies, managing director at Montford International, said it “beggars belief” that those involved with Australian Superannuation Schemes had previously said the products were safe from HMRC’s changes without confirmed knowledge of the rules.
“I think they were just hoping that UK would think out of sight and out of mind but this wasn’t to me. Now they appear to have egg on their faces. This is the most technical of subjects and you have salesman out there trying to flog QROPS as a product when it actually is a concept,” he said. “Thousands have now got caught out through their lack of knowledge around the rules.”
“Expats invested into the schemes will now have to get their prayer mats out, because if you look at HMRC’s ROPS list it is very clear it is your responsibility to find out if you have to pay tax on transfers.
“If a scheme said it was compliant when it wasn’t then you might have a case against them for falsely representing their schemes status, but they do not have many ways out now.
“We also have overseas advisers facing possible consequences – we can’t see how UK will change its rules to mend Australian lack of attention to prudent management.”
The HMRC recognised overseas pensions list is currently suspended for “reformatting” and is set to return on 1 July.
Last week, the Revenue confirmed that the list has been suspended to remove overseas schemes that do not meet the requirements of a QROPS, as was widely suspected.
