Temporary and Past Residents - Superannuation Issues

We do not assist in the preparation or submission of Departing Australia Superannuation Payments (DASP) for temporary residents but there have some recent changes to superannuation legislation that could have a significant impact on idividuals who have arrived in Australia as temporary residents, become permanent residents or citizens, and then moved overseas again and are no longer permanent residents or citizens.

In mid December 2008, the Australian Government introduced new measures for the treatment of the superannuation benefits of temporary residents. It is aimed at reducing the number of lost accounts and unclaimed money in the superannuation system as a result of temporary residents leaving Australia without taking their super benefits with them. Under the Temporary Residents’ Superannuation Legislation Amendment Act 2008 a temporary resident (who is not an Australian citizen, New Zealand citizen or a permanent resident) whose temporary visa has ceased to have effect can claim their Departing Australia Superannuation Payment (DASP) from their super fund within 6 months of their departure from Australia.

However, if a temporary resident whose temporary visa has ceased to have effect does not claim their DASP from their super fund within 6 months of departing Australia, their super benefit is treated as unclaimed money and the super fund must pay it to the Australian Taxation Office (ATO). The temporary resident will be able to reclaim their super benefit (less the DASP withholding tax) directly from the ATO at any time where certain conditions have been satisfied. If the departed temporary resident later becomes an Australian citizen, New Zealand citizen or the holder of a permanent visa, they can direct the ATO to rollover their super benefit from the ATO into a super fund. We are not clear regarding what level of return funds held with the ATO will make, but we are presuming it will be at a (low) statutory minimum. The legislation also increases the rate of withholding tax payable on a DASP paid from a taxed fund to 35% (up from 30%) where a DASP application is made on or after 1 April 2009.

Restrictions have also been introduced on the circumstances in which a temporary resident can access their super benefit with effect from 1 April 2009. From this date, any member who is, or has, at any stage, been a temporary resident (other than a retirement visa holder (subclasses 405 and 410) and who is not an Australian citizen, New Zealand citizen or permanent resident is only able to access their super benefit under the following conditions of release:

• death
• terminal medical condition
• permanent incapacity
• temporary incapacity
• unclaimed money payment
• Departing Australia Superannuation Payment
• release authority for excess contributions

In addition, from 1 April 2009, any member who is, or has, at any stage, been a temporary resident (other than a retirement visa holder (subclasses 405 and 410)) and who is not an Australian citizen, New Zealand citizen or permanent resident is unable to commence an income stream (ie. pension).

As a result of these changes, with effect from 1 April 2009, a member who is or has at any stage has been a temporary resident will no longer be able to access their benefit under the following conditions of release:

• permanent retirement from the workforce on or after attaining preservation age
• leaving employment at age 60
• attaining age 65
• severe financial hardship
• compassionate grounds approved by APRA
• termination of gainful employment with a standard employer-sponsor where the member’s preserved benefit at the time of termination are less than $200

In addition, it will mean that temporary residents will not be able to receive concessional tax treatment on their benefit. However, if a member who is, or has at any stage has been, a temporary resident has reached one of these conditions of release before 1 April 2009, the new rules do not apply. The following example provided in Government literature explains how this works.

"Sue is 60 when she arrives in Australia from the UK on a temporary resident visa. She finds work as a receptionist and works at this job for three years before retiring at age 63 on 5 February 2009. Sue does not apply for her benefits at this stage. Sue travels through Australia for 6 months before returning to the UK. She requests the release of her benefits under the retirement condition of release. As she met this condition of release before 1 April 2009 she satisfies this condition of release."

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