Temporary Residents Superannuation Benefits Diminish as Withholding Taxes increase.

If you are a temporary Australian resident making Superannuation contributions while you are in Australia you need to re-think your strategies.

Among the recent changes to Superannuation in the 2009 Australian Federal Budget was a sting for temporary residents.

Those who come to Australia on a temporary resident visa are generally subject to employer superannuation guarantee payment requirements in the same manner as permanent residents.

Additionally, they may make personal superannuation contributions and their employer may contribute more than the superannuation guarantee requirements (e.g. due to salary sacrifice agreement with the temporary resident)

The new provisions largely remove any incentive for temporary residents of Australia to make superannuation contributions while in Australia.

This is primarily because, from 1 April 2009, the already severe Departing Australia Superannuation Payment (‘DASP’) withholding tax rates will increase from 30% to 35% and 40% to 45% depending on the component being withdrawn from the fund.

A limited range of conditions of release will be available, making it very difficult to receive a benefit without DASP withholding tax applying.

Global pensions CEO Kelvin Boy says: “The increase in rates brings the withholding amount into line with other jurisdictions such as the US and the UK. Proper planning of the source of the superannuation contributions and the location of the fund removes the potential for these tax obligations.”