Utilising Australian super as an Aussie expat is typically a good strategy, especially if you consider Australia for your retirement or if the tax treatment on Australian superannuation is more favourable than in your current country of residence.
When managed correctly, Australian superannuation can be a powerful tool for retirement planning, providing long-term financial security for you and your family. Let’s explore the rules of superannuation contributions for Australian expats, tips, and valuable considerations for good long-term financial planning as an expat.
What is Australian Superannuation for Expats?
Superannuation, or “super,” is a government-mandated savings program designed to help Australians and foreign workers in Australia save for retirement.
While it differs from similar programs like the 401(k) in the United States or the National Insurance Scheme in the United Kingdom, the concept remains the same: saving for the future.
Your eligibility for superannuation contribution depends on your residency status for tax purposes.
- Tax Resident: If you’re considered an Australian resident for tax purposes, you can generally make voluntary contributions to your superannuation. Your employer may also be required to make Super Guarantee (SG) contributions if you work for an Australian company.
- Tax Non-Resident: As a non-resident, you can still contribute to your super, but you may face restrictions as some super funds don’t accept contributions from non-residents. It’s essential to understand your options and choose the one that suits you best.
Note that some superannuation funds require members to be residents, so you may need to roll over your super into a fund that accepts non-residents before leaving the country.
If your employer has transferred you overseas, they may continue making contributions based on your Australian “pensionable base salary.”
In some cases, you may benefit more from contributing to an international retirement fund or another investment structure rather than continuing with your Australian super. It’s advisable to seek professional advice on this matter.
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Types of Superannuation Contributions for Aussie Expats
Concessional, non-concessional and downsizer contributions are the main superannuation contributions relevant to Australian expats.
Concessional Contributions
Concessional contributions are taxed at 15% within the super fund, typically made with pre-tax money. These contributions include:
- Super guarantee contributions from an employer
- Salary sacrifice contributions from pre-tax income
- Personal contributions claimed as a tax deduction
Australian expats often don’t receive super from their employer and can’t use salary sacrifice with overseas employment. Therefore, you commonly make personal contributions to your superannuation and claim them as a tax deduction, reducing taxable income in Australia.
Concessional contributions benefit expats with positively geared investment properties that generate taxable income. If your income is subject to withholding tax, you’re a part-year resident in a low tax bracket, or you have an SMSF as a non-resident, be cautious about this contribution.
Note that you can claim a super deduction only to reduce your net income to zero, not to create a tax loss.
Non-Concessional Contributions
These contributions are made with post-tax money, so they are not taxed when received by the super fund. These can include:
- Personal contributions not claimed as a tax deduction
- Spouse contributions
- Government Co-Contribution
- Low-Income Super Contribution
For Australian expats, personal contributions not claimed as a tax deduction are the most common way to boost super savings.
However, spouse contributions, Government Co-Contributions, and Low-Income Super Contributions are generally not effective for expats since eligibility often requires Australian residency or meeting specific income tests. These tests involve earning at least 10% of income from employment-related activities in Australia.
Downsizer Contributions
Downsizer contributions allow you to contribute up to AU $300,000 from the sale of your main residence into superannuation without impacting your contribution caps.
To qualify, the property must be exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, meaning you need to sell the property as an Australian tax resident, and it cannot be an investment property. This option is generally not available if you’re a non-resident Australian expat.
Rules for Contributions to Australian Superannuation for Expats
Here are some rules and considerations that impact your superannuation contributions as an Aussie expat.
Impact of DTAs on Superannuation Contribution
As an expat, how your superannuation contribution is taxed depends on whether your country of residence has a Double Tax Agreement (DTA) with Australia. DTAs aim to prevent double taxation by assigning taxing rights and allowing for tax credits between the two countries.
If you live in a country without a DTA and receive income from an untaxed source or are under 60, that income will be subject to Australian tax. However, you may be eligible for a tax offset of 15% (or 10% for untaxed sources).
Is Your Employer Obliged to Pay Superannuation While You’re Overseas?
Australian employers are generally required to make Superannuation Guarantee (SG) contributions for employees, even those working overseas, provided the employee remains an Australian tax resident and is employed by an Australian entity. However, there are exemptions if the employee or the employer becomes a non-resident for tax purposes.
Contributions may also be required under Industrial Awards, Enterprise Agreements, Australian Workplace Agreements, or individual employment contracts. Employers may apply for Certificates of Coverage to avoid double social security costs in Australia and the host country.
Receiving Super Payments
Lump sums and income stream payments from a taxed superannuation fund are tax-free for Australian tax residents aged over 60. However, payments to individuals under 60 or from untaxed funds (such as public service funds) may attract Australian tax.
If you plan to retire overseas or become a tax resident of another country, it’s crucial to understand how your superannuation payments will be taxed in that country. The existence of a DTA may significantly impact the tax treatment of these payments.
If you live in a country without a DTA, non-resident rates of Australian tax may apply to payments from untaxed superannuation funds, potentially leading to double taxation.
It’s also important to remember that access to your super is subject to minimum drawdown rates, which increase with age.
Current Minimum Super Drawdown Rates (%)
The Current Minimum Super Drawdown Rates refer to the minimum percentage of your superannuation balance that you’re required to withdraw each year once you start accessing your super as an income stream, typically in retirement.
The Australian government determines these rates, which vary based on your age. Here are the current minimum percentage factors for each age group.
| Age (Years) | Minimum Drawdown |
|---|---|
Under 65 | 4% |
65 – 74 | 5 |
75 – 79 | 6 |
80 – 84 | 7% |
85 – 89 | 9% |
90 – 94 | 11% |
95 or over | 14% |
For example, if you’re under 65, you must withdraw at least 4% of your annual superannuation balance. These percentages ensure that retirees draw down on their superannuation savings over time rather than leaving the funds untouched. The rates increase with age to reflect the likelihood of needing to access more of your retirement savings as you grow older.
👉See also: Recent Superannuation Tax Changes
How to Select a Superannuation Fund
If your employer is based in Australia, they usually provide a Superannuation Standard Choice Form, or you can submit your preferred fund directly. If you don’t choose a fund, your employer will select one on your behalf. Since superannuation funds vary in benefits and services, selecting the right one is essential. Here’s how you can select the right superannuation fund.
- Understand Your Options: Industry funds, retail funds, corporate funds, and Self-Managed Superannuation Funds (SMSFs) are some possible options. Each has unique benefits, costs, and management styles.
- Review Eligibility and Requirements: Ensure that you meet the eligibility criteria for the fund you’re considering, particularly if you’re a non-resident or considering an SMSF.
- Evaluate Performance and Compare: Review the fund’s historical performance, ideally for at least 5 to 10 years.
- Check Insurance Options: Most super funds offer insurance cover for life, total and permanent disability (TPD), and income protection.
- Assess Member Services and Features: Consider the range of additional services the fund offers, such as financial advice and online account management.
- Understand the Default Fund: If you don’t actively choose a fund, your employer will likely contribute to a default fund on your behalf. Review the default fund to ensure it meets your needs.
- Make Your Choice and Inform Your Employer: Once you’ve selected a superannuation fund, fill out the Superannuation Standard Choice Form provided by your employer or submit your fund details directly.
You can also take professional advice to guide you through the superannuation fund selection process to reduce the required effort.
Tips for Managing Your Australian Superannuation as an Expat
Here are some expat superannuation tips to help you navigate your Australian superannuation from overseas.
Assign a Trustee for Your SMSFs
If you have a Self-Managed Superannuation Fund (SMSF), ensure that control remains within Australia to comply with residency rules and avoid severe penalties. While living abroad, ensure that the central management and control of the SMSF remain in Australia, typically through appointing an Australian-based trustee.
Consider Consolidating
Many expats have accumulated multiple superannuation funds from different jobs. Consolidating them can simplify management and potentially reduce fees. Before consolidating, review the insurance and benefits linked to each account to ensure you don’t lose valuable coverage.
Transfer Overseas Pensions
When returning to Australia, consider transferring any overseas pensions into your Australian superannuation fund, depending on the rules in the country where the pension was accumulated. Transferring overseas pensions can streamline your retirement savings, but it’s essential to understand the tax implications and the regulations in both countries.
Australia has regulations for transferring overseas superannuation funds, and tax treatment varies by the country of origin. You may avoid tax if you transfer your super within six months of becoming an Australian tax resident. However, transfers made after six months may be taxed on the growth since your residency began.
Be Aware of the Preservation Age
The preservation age is when you can access your superannuation, which varies depending on your birth year. As an expat, it’s essential to plan your retirement in line with this age. Early withdrawals can incur significant penalties, so understanding when to legally access your super without penalties is crucial for effective retirement planning.
Plan for Currency Exchange Risks
If you plan to retire outside of Australia, consider the impact of currency exchange rates on your superannuation. Fluctuations in exchange rates can significantly affect the value of your retirement savings if you need to convert Australian dollars to another currency.
👉See also: Superannuation Strategies to Minimise Tax in Australia
Maximise Your Super, Protect Your Income
Navigating Australian expat superannuation can be challenging and confusing. We recommend seeking professional advice and staying informed about the latest superannuation policies and regulations to deal with these challenges effectively.
If you’re unsure about how to manage your superannuation and get the most benefits, we can help you achieve the best results tailored to your circumstances.
Contact us today to get started with long-term financial planning and take care of your retirement goals as an Australian expat.
Get Australian Expat Tax Diagnostic Scan From the Experts
Know your Australian tax exposure level, key risks, and your next-step plan. Find exactly where you stand and what to do next.
FAQs about Superannuation Contributions for Australian Expats
What are the benefits of Superannuation Contributions for Australian expats?
Contributing to superannuation offers expats several advantages, including tax benefits both in Australia and potentially in their country of residence. It’s an intelligent way to build long-term savings and invest in diverse assets.
This strategy can increase returns, helping you secure your financial future and achieve your retirement goals.
What is the super guarantee rate?
The current superannuation guarantee rate is 11.5% of your ordinary time earnings.
Your Australian employer is required to make super contributions at least four times a year, once every quarter. If you are covered by an award or employment agreement that specifies a higher super rate than 11.5%, your employer must contribute at the higher rate.
What are the key tax considerations for Australian expat superannuation?
As an expat managing your Australian superannuation from overseas, consider these key tax aspects.
- Tax Residency: Your tax residency status affects how your superannuation is taxed. Non-residents may face different tax rules than Australian residents.
- Double Tax Agreements (DTAs): DTAs between Australia and your country of residence can help prevent double taxation on your superannuation income.
- Contributions: Understand the tax implications of making super contributions while living abroad, especially regarding concessional and non-concessional contributions.
- Withdrawals: Super withdrawals may be tax-free if you’re an Australian resident over 60, but non-residents or those under 60 may face taxes.
- Superannuation Guarantee (SG): Your employer’s obligation to make SG contributions may continue if you remain an Australian tax resident while working overseas.
- SMSFs: Ensure your Self-Managed Superannuation Fund (SMSF) retains its Australian residency status to avoid total taxation on income and gains.
- DASP: If you leave Australia permanently, you may withdraw your super through a Departing Australia Superannuation Payment (DASP) taxed at varying rates.
- Currency Risks: Holding superannuation in Australian dollars while living abroad exposes you to currency fluctuation risks.
Is your employer obliged to pay superannuation while you’re overseas?
Australian employers must make a superannuation guarantee (SG) payment into an Australian super fund. However, there is an exemption for employees working outside Australia if:
- The employee is a non-resident of Australia for tax purposes or
- The employing entity is a non-resident for tax purposes.
If the employee remains an Australian tax resident and is still employed by an Australian entity, the employer must continue making contributions. Contributions may also be required due to Industrial awards, Enterprise Agreements, or individual employment contracts.
How do I get superannuation after leaving Australia?
To claim your superannuation after leaving Australia, complete the “Application for Departing Australia Superannuation Payment” form (NAT 7204) and submit it to each of your super funds.
If you’re using a paper form, be aware that your super fund may charge a fee based on the value of your Australian expat superannuation.
How do you manage your Australian superannuation as an Aussie expat?
As an expat, how your superannuation contribution is taxed depends on whether your country of residence has a double tax agreement (DTA) with Australia. DTAs aim to prevent double taxation by assigning taxing rights and allowing for tax credits between the two countries.
If you live in a country without a DTA and receive income from an untaxed source or are under 60, that income will be subject to Australian tax. However, you may be eligible for a tax offset of 15% (or 10% for untaxed sources).
Does my visa status affect how I manage my Australian superannuation from overseas?
If you plan to move to Australia, your visa status can affect how you manage your superannuation. If you decide to return home, you can access your super through a Departing Australia Superannuation Payment (DASP).
Although you generally cannot access your super until you reach preservation age (usually 65), a DASP allows you to take your accumulated super back home if you meet the criteria. You can find detailed tax rates on the Australian Tax Office website.
