Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law, today released a consultation paper on payment of temporary residents' superannuation to the Australian Government.
Under the measure, future superannuation contributions and existing balances of temporary residents will be paid to the Australian Government.
This measure was announced by the previous government with a start date of 1 July 2008.
However, the Rudd Government will now defer the start date to the date of Royal Assent (expected before the end of 2008) to allow consultation on administrative issues.
Background
Temporary residents are currently able to claim their superannuation after permanently departing Australia by applying for a Departing Australia Superannuation Payment (DASP) from their superannuation fund.
The DASP is the value of their superannuation minus tax which is:
- 30 per cent for the taxed element of a benefit; and
- 40 per cent for an untaxed element.
Outline of new measures
From the date of Royal Assent, all superannuation contributions and superannuation balances held for former and current temporary residents (both existing balances and those accruing in the future) will be paid to the Australian Government.
Employers will still be required to pay superannuation guarantee (SG) contributions for temporary residents.
Employers will have the option of sending employer contributions to a superannuation fund to meet their SG obligations (as they do currently) or directly to the Australian Taxation Office (ATO).
On an annual basis the Federal Government, through the ATO and the Department of Immigration and Citizenship will data match using contribution information and temporary resident information to identify superannuation funds that hold balances for temporary residents.
The ATO will notify the funds and the funds will then be required to pay balances to the ATO within a specified time frame.
Temporary residents who permanently depart Australia will be able to claim back superannuation that had been paid to the ATO by making a claim to the ATO within five years of permanent departure (subject to existing withholding tax arrangements).
Amounts not claimed within five years will be forfeited.
Interest will not be paid on amounts held by the ATO.
Where a temporary resident becomes a permanent resident of Australia, the amount of their superannuation paid to the Australian Taxation Office will be able to be reclaimed with interest (generally by being paid back into a superannuation fund).
Employers will still be required to make superannuation contributions for their temporary resident employees under the SG legislation and will still be able to meet this obligation by making contributions to superannuation funds. However, consideration is also being given to providing employers with the option of making employer contributions for temporary residents direct to the ATO.
It is proposed that the measure apply in respect of all future, current and previous temporary residents, other than New Zealanders and those who have become permanent residents.
Comment sought
Comment is sought on whether it is necessary to provide this additional option for employers to pay contributions to the ATO, or if it will be sufficient and simpler to only provide for ongoing contributions to superannuation funds (which will later pay those amounts to the ATO).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.