Australia is a popular destination for overseas visitors, and many young people choose to take working holidays, or arrange longer-term work while on holidays in this country.
New rules, introduced in December 2016, now impose a hefty super tax on super benefits when these ‘working holiday makers’ leave the country, and apply for a Departing Australia Superannuation Payment.
A ‘working holiday maker’ is defined by the tax laws to be “an individual who holds Subclass 417 (Working Holiday visa), a Subclass 462 (Work and Holiday) visa, or certain related bridging visas”.
Note that the introduction of a whopping 65% benefits tax for working holiday makers does not mean that all temporary residents will be hit with this hefty extra tax, although super tax will still be deducted (most likely a 38% benefit payments tax, and in rare cases a 47% benefit payments tax).
Important: The tax treatment of Departing Australia Superannuation Payments for a temporary resident, who is not a working holiday maker, will not change from the current tax treatment, which is set out below.
The continuing tax treatment for a temporary resident (who is NOT a working holiday maker) of a DASP depends on the components of the super benefit:
- Nil tax for the tax-free component of a super benefit (typically this involves after-tax super contributions)
- 38% tax for taxable component (taxed element) (typically involves employer contributions, other before-tax contributions, and fund earnings on all contributions)
- 47% tax for taxable component (untaxed element) (typically involves certain public sector employers, and involves employer contributions, other before-tax contributions, and fund earnings on all contributions)
The tax treatment for Departing Australia Superannuation Payments set out above continues to apply, for those temporary resident visa workers who are not ‘working holiday makers’.
Super alert! Since 1 July 2017, and applicable to ‘working holiday makers’ only, the benefits payment tax will jump to 65% (compared with the pre-July 2017 rate of 38%).
For more information on Departing Australia Superannuation Payments, see the following SuperGuide articles: