Superannuation for Non-Residents
What to do about Superannuation when you leave Australia
Non-residents can continue to make superannuation contributions in Australia; the rules regarding eligibility to make these contributions in Australia apply equally to residents and non-residents. You should, however, not make contributions whilst non-resident to a self managed superannuation in the absence of professional advice.
Under changes announced by the Government in 2007 you also do not need to be working to contribute to superannuation if you are under age 65. When you are over 64 you can contribute to superannuation if you are gainfully employed during the financial year for at least 40 hours over a consecutive 30 day period – and it is our understanding that this “work” does not need to take place in Australia.
Generally, it is viable and appropriate to make further contributions to Australian superannuation if your objective is to eventually retire in Australia, or if the taxation on Australian superannuation is more attractive than the country of residence. This is where taxing rights and double tax treaty arrangements may have a major impact. For example, as long as withholding taxes, or other costs, are not too significant it may be better for you to make tax effective contributions into your local pension fund which you later withdraw and transfer to Australia. There are forex risks associated with this approach, and you need to be mindful of limits on non-concessional contributions into superannuation – but it can be an effective strategy in places such as the UK and US in certain circumstances.
Note, however, that some superannuation funds require that members be residents, therefore you may have to transfer to a public offer fund that provides for non-residents. If you have been transferred overseas by your employer then it is likely the fund will make provision for non-residents, with your employer continuing to make contributions - probably on the basis of your Australian “pensionable base salary”, or equivalent. In these situations, if you are in receipt of additional salary reflecting expatriate conditions, an issue may be whether it is appropriate for you to make additional retirement contributions and whether it should be into your Australian fund. Expatriates may be better served making contributions into an International retirement fund, or some other investment structure rather than simply continuing with their current, Australian arrangements. There is additional discussion of the International options available but you should ultimately seek professional advice in this area.
Is your employer obliged to pay superannuation whilst you are overseas?
As you will appreciate, Australian employers are presently required to make contributions to an Australian superannuation fund of 9.5% on ordinary times earnings - and this will increase gradually to 12% over the period to 2025/26. There is however an exemption from this requirement for employees working outside Australia, if:
• The employee has become non-resident of Australia for tax purposes; or
• The employing entity (company, partnership, individual etc.,) is a non-resident of Australia for tax purposes.
However, if the employee remains a resident of Australia for income tax purposes, and an Australian employing entity continues to employ them, then the employer is required to continue to make contributions.
In addition, contributions may continue to be required as a consequence of Industrial awards, Enterprise Agreements, Australian Workplace Agreements; or individual employment contracts. To assist both employees and employers assess whether they have a continuing entitlement to superannuation and whether social security payments need to be made in the host country - as well as whether payments made overseas are deductible in Australia - we have created a Superannuation Flow Chart.