Q: My husband and I are getting ready to return home (USA) after living & working in Perth for the past 2 years. We came to WA on a 457 visa. My husband has a super fund & we were wondering if we can leave the money in his super until he reaches retirement age (i.e. preservation age). My husband was born in September of 1960, which makes age 60 his preservation age. We hope that delaying withdrawal from the super until age 60 would decrease or eliminate the 35% tax rate. If we leave the money in his super after our visa expires, then the money may be sent to the ATO. Is it safe to leave the money with the ATO for 10 years? Is there a time limit for claiming the money?
Trish’s response: Temporary residents are treated differently under the super rules in terms of accessing super benefits early, although you need to check with the ATO how the rules specifically apply to your circumstances.
If an individual has held a temporary visa under the Migration Act 1958 (except for visas under subclasses 405 and 410), then such an individual is eligible to apply for a ‘Departing Australia Superannuation Payment’ when leaving Australia.
In most cases, a superannuation fund must transfer the individual’s super benefits to the ATO if the individual has not claimed the benefits within 6 months of departing Australia, or within 6 months of the expiry or cancellation of the visa, whichever event is later.
A temporary resident doesn’t have to claim his or her super benefits upon leaving the country or, at a later stage. It’s possible to leave the benefits in Australia until retirement, but if the super benefits are transferred to the ATO, the super benefit doesn’t receive any interest/earnings or pay premiums for any insurance coverage you may have had when you were a member of the super fund.
Note: From 1 July 2013 onwards, a form of ‘interest’ will be paid at a rate equivalent to the rate of inflation – Consumer Price Index (CPI) on all superannuation accounts reclaimed from the ATO. Currently, no interest is paid on unclaimed superannuation monies, although if that super account had remained with the super fund, then you could have expected investment earnings less fees.
In relation to your comment about saving tax by leaving the super benefits in unclaimed super until the age of 60, I believe the payment is still subject to withholding tax. My understanding (but I’m willing to be corrected on this) is that former temporary residents (now non-residents) receiving money from the ATO (rather than a taxed super fund) are not eligible for tax-free payments from the age of 60, and withholding tax is payable regardless of age, or whether you have retired – although you need to confirm the withholding tax treatment of unclaimed super benefits for non-residents with the ATO.
Note that the definition of a resident for tax purposes is different to the definition used by the Immigration department or Centrelink.
Background: Based on the ATO website, the withholding tax rates for DASPs are:
- 0% for the tax-free component
- 35% for a taxed element of a taxable component
- 45% for an untaxed element of a taxable component (certain public sector funds).