Speaking on a recent episode of The SMSF Adviser Show, Mr O’Connell explained that when clients bring a UK pension to Australia, it effectively comes in two components.

“There’s the growth component and the non-growth component. In Australian terms, the non-growth component is your liquid fund earnings, and that’s going to be taxed in the same way as it would have been if the individual had brought their UK pension in a suitcase with them when they arrived in Australia,” he said.

The way that component is taxed, he said, would depend on whether the client opted to pay that as an individual, which will be done at their marginal rate of tax, or it can be taxed at a concessional rate if it’s a complying transfer.

The non-growth component, on the other hand, is brought in as non-concessional contributions.

Mr O’Connell noted that while the bring-forward rules can be triggered in order to allow another two years of contributions to be brought in, advisers also need to watch the client’s total superannuation balance.

“There are a few moving parts to this, and so it’s not as simple as saying, ‘There’s the growth component and the non-growth component, let’s bring the whole thing in’,” Mr O’Connell said. It can actually take a number of years to bring a pension in, he explained.

Mr O’Connell said the recent change to the work test was good news, however, as those clients who are looking at retiring and not working past 64 no longer have to meet the work test to make those contributions.

“They’re obviously not going to be claiming a deduction anyway and that requirement no longer needs to be met up to age 74,” he said.

“That should allow people with larger balances to bring more in.”

However, he stressed that it’s still important to tackle these pension transfers early.

“What we often see where there’s a couple is that one spouse will have a larger superannuation balance and a much larger foreign superannuation balance, so if you start the process at age 60 or 61, you have very few planning strategies left,” he said.

“So doing it as early as possible means you can look at your contribution splitting and any other type of planning strategy that will allow you to manage your balances to ensure that you can ultimately get the maximum amount of combined foreign and Australian superannuation into the most tax-effective structure to produce retirement income for the rest of your life. So, the sooner you look at it, the more planning opportunities you might have.”