Provided by Mercer: 3/4/09
Recently, legislation was passed which made a number of changes to super benefits for temporary visa holders.
Higher tax rate applies from 1 April 2009
- From 1 April 2009, the rate at which tax is withheld from the taxable component of superannuation benefits (Departing Australia Superannuation Payments*) paid to temporary residents who have left Australia will increase from 30% to 35%. The tax rate for any untaxed components (which arise mainly in government super funds) will also increase from 40% to 45%.
- Significantly lower tax rates (or zero tax) can currently apply to benefits paid after reaching age 65 or from age 55 if certain retirement requirements are met. These will no longer apply from 1 April 2009 to temporary or former temporary residents.
- The new higher rates will generally apply to payments requested from 1 April 2009.
- When an application for a benefit is made before 1 April 2009 but the payment is after this date, the current tax rates will apply provided the eligibility conditions are met before 1 April 2009.
Unpaid benefits must be transferred to the ATO
- From 1 April 2009, super funds must transfer the benefits of most temporary residents to the Australian Taxation Office (ATO) where at least 6 months has passed since the person’s temporary visa expired and the person has left Australia.
- The ATO will provide the super fund with a list of the members whose benefits must be transferred.
- After transfer to the ATO, the person will then need to contact the ATO to claim their benefit. Any payment made by the ATO will be taxed at the new rates.
- The ATO will not pay interest on any amounts it receives from a superannuation fund (except in certain circumstances if the person becomes an Australian citizen or permanent visa holder).
Changes to the conditions for accessibility of preserved and restricted non-preserved benefits
Preserved and restricted non-preserved super benefits must be kept in a superannuation fund or approved superannuation arrangement and are only accessible if conditions imposed under superannuation law are satisfied.
From 1 April 2009, there will be a change in the conditions under which a preserved or restricted non-preserved super benefit can be accessed for a person who holds, or has
held, a temporary visa. The benefit can be accessed if:
- the person leaves Australia and the temporary visa has expired (or been cancelled)*
- the trustee is reasonably satisfied the person is permanently incapacitated#
- the person has a terminal medical condition (and provides required evidence)#
Other options such as reaching age 65, retiring permanently from the workforce, financial hardship and compassionate grounds will no longer be valid conditions for access to preserved or restricted non-preserved super benefits for a person who holds, or has held, a temporary visa.
*Australian and New Zealand citizens and permanent Australian residents are not eligible for this payment, as they have the option of retiring in Australia. Note that, from 19 December 2008, all other former temporary residents are eligible for these payments. Previously the payments were only possible in respect of some temporary visas.
# As provided under superannuation law.
It is recommended that you:
- act now if your temporary visa has already expired and you have left Australia but have not yet claimed your super benefit or taken it as a pension.
- speak to a licensed, or appropriately authorised, financial adviser, about your contribution strategy if you are a temporary visa holder and you or your employer make additional contributions to super.
Permanent visa holders, who have previously held a temporary visa at any time, also need to be aware of the new rules as they may also apply to you if your permanent residency status has lapsed or lapses at any time in the future. In each case, the trustee recommends that you seek advice in relation to your individual circumstances.
Note that the new rules generally do not apply to you if you are an Australian or New Zealand resident, a permanent resident of Australia or hold or were the holder of a Subclass 405 (Investor Retirement) or a Subclass 410 (Retirement) visa).
If you have any questions about these changes, please call the Helpline on
1800 682 525.
This information has been prepared by Mercer (Australia) Pty Ltd ABN 32 005 315 917 for general information only. The information does not take into account your personal objectives, financial situation or needs. Therefore, you should not act on this information if you have not considered the appropriateness of this information to your personal objectives, financial situation and needs. You should consult a licensed or appropriately authorised financial adviser before making any investment decision.
