If you have a defined benefit scheme benefit you may be familiar with the role of the actuary. An actuary is responsible for maintaining the scheme’s funding and meeting its liabilities, both now and in the future.

When transferring a pension fund from the UK to Australia you may be liable to pay Applicable Fund Earnings Tax. This is an ATO levied taxation that you or your fund pay on the difference between the value of your fund on the day you became an Australian tax resident and the day you transferred your fund.

This is a relatively easy calculation to complete if your pension fund is a defined contribution such as a Personal Pension Plan or Stakeholder pension. This is not the case if your fund is a Defined benefit or Final Salary scheme. This is because the values you are provided with are notional values, not real values. The Cash Equivalent Transfer Value (CETV) you are provided with only has a real crystallisable value for 90 days from production.

It is incredibly unlikely that you have the CETV dated the day you arrived as a tax resident in Australia. Also, if you have engaged in a tranching strategy then you will have a period of defined benefit accrual and a period of defined contribution accrual.

In some circumstances it is possible to request an ATO Private Binding Ruling as to how they will treat the Applicable Fund earnings calculation. An ATO PBR does not guarantee that the tax is correct, it guarantees that if subsequently the tax calculation is deemed as incorrect you will not be fined. The process of requesting a PBR is time consuming, and often there is no consistency in calculations. We are in communication with the ATO to simplify this process and maintain accuracy in the calculations.

We therefore currently engage with an independent consulting actuarial firm, who will complete the calculations required for you in a consistent manner and will provide you with a written advice report that you can present to the ATO on audit.

Again, we do not engage this service in isolation but incorporate it within our complete advisory and implementation service therefore ensuring no inconsistencies or errors are made.