Superannuation for Temporary Residents

Australia is a popular destination for many people who visit from overseas each year. In fact, for many young people, a working holiday in Australia is a right of passage. We are all very familiar with the backpackers who come and enjoy the sights and experiences that Australia has to offer. However, it is not just young people who visit Australia for extended periods. In many cases, mature aged people come to work in Australia on a temporary basis bringing vital skills and experience that can benefit the country.

On 18th December 2008, legislation was enacted that will have an impact on superannuation benefits held by Australia’s temporary residents. This legislation had been foreshadowed before the previous election; however, the format on the new laws is somewhat different to that originally proposed.

Temporary residents can still make contributions to an Australian superannuation fund during their residency and, those who are employed will, in many cases, be having contributions made on their behalf by their Australian employer under obligations imposed by the Superannuation
Guarantee system.

Many readers will be familiar with the notion that benefits within a superannuation fund are “preserved”. This simply means that they cannot be taken out of the superannuation system until a “condition of release” has been met. The most common condition of release is having retired on or after reaching preservation age (currently 55).

Some years ago, a person who permanently departed Australia could access their superannuation benefits. This was available not only to temporary residents, but also to permanent Australian residents who were leaving Australia on a permanent basis. In 2002, the laws relating to accessing superannuation benefits on permanent departure from Australia changed significantly.

Effective from 1st July 2002, the only people who could access their superannuation benefits upon permanently departing the country are those who met certain conditions. One such condition was that the person had to have held one of a number of classes of eligible temporary resident visa and that visa had expired or been cancelled. No longer could a permanent
resident access their superannuation if they were leaving Australia to live overseas.

Where a superannuation benefit is paid out to a temporary resident on their departure, it is referred to as a “Departing Australia Superannuation Payment” (DASP). A DASP is subject to its own special taxation rates which, incidentally will increase from 1st April 2009.Where the new amendments have a specific impact is in relation to benefits held in an Australian superannuation fund by someone who:
  • Left Australia at least six months ago; and
  • The person no longer holds a current temporary visa.

Where a former temporary resident falls into this category, any unclaimed superannuation amounts held in their Australian superannuation fund must be paid to the Australian Taxation Office (ATO) upon request. A former temporary resident (who held a prescribed class of eligible temporary resident visa) will still be able to claim their superannuation benefit in the future. They will claim the benefit from the superannuation fund where it is still holding the funds, or from the ATO, if the benefit has already been transferred.

There are a number of exemptions from these arrangements, including New Zealand residents, holders of permanent visas, and holders of retirement visas. Importantly, a permanent Australian resident who departs Australia is still not able to access their preserved superannuation benefits until they meet a condition of release.

(Source: Professional Investment Services)

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