Expat Superannuation Australia: Can Expats Access Superannuation?
Even as expats, the importance of superannuation in retirement planning remains just as crucial as when you were an Australian resident. But managing your superannuation while living overseas can be a complicated process.
You must carefully weigh your options, such as continuing or stopping contributions, and understand each decision’s tax implications. That’s why you require a specialist’s help to properly manage your super, navigate any complexities you might face, and ensure compliance with regulations.
This article is a guide for expats on managing their superannuation.
Superannuation and how it works in Australia
Superannuation, commonly referred to as super, is Australia’s retirement pension benefit fund. By contributing to this super fund, Australians save money for long-term financial security and guarantee retirement security.
By law, your employers must make compulsory contributions of a minimum of 10.5% of your salary into your super fund. As a member, you can add to that by making voluntary contributions within certain limits. The government can also contribute to your super if you are eligible for the super co-contribution scheme.
When can you access your super?
You can take the fund as a lump sum or as regular payments. Generally, you can only access your super when you:
- Reach preservation age and retire.
- Turn 65 even if you’re still working.
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What happens to your Superannuation when you leave Australia?
When you leave Australia, your superannuation fund will continue to operate as usual, regardless of whether you reside in Australia or abroad. Your existing funds will continue to accrue returns, although you may still be charged fees, even if you are living overseas.
However, the status of future contributions will depend on your personal decisions and your employer. In most circumstances, you can either keep making contributions or stop and keep maintaining your fund:
Scenario one: Resume contributing to Super from overseas
Firstly, you must understand that if you are no longer working in Australia or earning income from an Australian source, you don’t have to make any further compulsory contributions to your superannuation account.
However, if you choose to, you can continue making superannuation contributions: either tax-deductible (concessional) or after-taxes (non-concessional).
As super contributions are tax deductible, it can help you to reduce income tax (for e.g. rental income) if they are positively geared. For example, if you’re paying 32.5% tax rate by contributing to your super, you’d only be paying 15%, saving you 17.5%.
Working overseas for Australian-based company vs overseas company
When you work overseas, your employer’s decision to continue contributing to your superannuation fund depends on several factors. These factors include the country where you work, the terms outlined in your employment contract, the superannuation laws of Australia and the country where you are employed. It also depends on how much money you make.
If you are working overseas temporarily and your employer is an Australian resident, they are generally required to continue making superannuation contributions on your behalf. However, if you work for a foreign employer or have become a non-resident of Australia for tax purposes, your employer may not be required to make superannuation contributions on your behalf.
On the other hand, if you work for an overseas company, your employer may not be required to make superannuation contributions. However, this may depend on several factors, such as whether the country you work in has a social security agreement with Australia, the terms of your employment contract, and whether you are considered a resident or non-resident for tax purposes in Australia.
In some cases, your employer may be willing to make superannuation contributions on your behalf voluntarily, but this would depend on the policies of the company and the local laws of the country where you are working.
Scenario two: Stop making contributions to your super
If you decide to stop making contributions to your super as an expat, you need to consider how you want to proceed to manage your superannuation fund.
But why would you want to stop your contributions if you are getting tax benefits by contributing?
As an expat, there are some reasons why you may wish to discontinue your contributions to your super:
- You can’t access your super until you reach your preservation age: If you need cash for emergencies or other investment opportunities with higher return on investment, you won’t be able to access your superfunds. This applies more to young expats who are generally recommended against contributing so that they don’t get their money locked up until retirement.
- Control and limitations: One of the biggest negatives is that you don’t have control of that money for years until you reach your preservation age. Plus, the options of what you can do with it is limited to the superfund.
If you want to stop your contributions to your super, you need to be wary of significant implications for your retirement savings. Consult with an expert before deciding how to manage your super.
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Benefits of Superannuation for expats
Expats can enjoy several benefits by contributing to superannuation, including tax advantages in Australia and their country of residence. It allows for long-term savings and investment benefits by investing in diverse assets.
This can result in higher returns over time, leading to financial security and achieving retirement goals. Expats can ensure a comfortable retirement by planning and regularly contributing to superannuation while taking advantage of the Australian tax system.
Australian Expat Superannuation Contribution Rules: Things to consider
As an Australian expat, there are several rules and considerations to remember when contributing to superannuation. Here are the main points to consider as an Australian expat when it comes to contributing to superannuation:
- Be aware of the limits on before-tax and after-tax contributions to avoid penalties.
- Consider the impact of currency exchange rates when making contributions.
- Understand the tax implications of withdrawing super benefits based on age and non-resident status.
- Stay informed about changes to superannuation rules and policies that could impact contributions and retirement savings.
- Seek professional advice to make informed decisions about superannuation contributions.
Managing your Superannuation as a non-resident
Managing your superannuation as a non-resident can be challenging, but there are several tips that can help you optimize your retirement savings:
- Assign a trustee for your Self-Managed Superannuation Funds (SMSFs): The residency rules for Self-Managed Superannuation Funds (SMSFs) in Australia require that control of the fund must be maintained within the country. If you are an Australian expat operating your SMSF yourself and without a trustee, you risk having your super fund deemed non-compliant and may also receive severe financial penalties.
- Keep your fund updated with your current contact details: Your fund needs to be able to contact you, especially if they need to communicate any regulations or compliance requirements changes.
- Nominate a beneficiary: Ensure you have nominated a beneficiary to receive your superannuation in the event of death. This can help ensure your money goes to the person you intend it to.
- Check your fund’s investment strategy: Review your fund’s investment strategy to ensure it is still aligned with your financial goals and risk tolerance.
- Stay informed about changes in legislation: Keep up to date with any changes in Australian legislation that may affect your superannuation, such as changes to tax laws or contribution limits.
- Consider consolidating your superannuation accounts: If you have multiple superannuation accounts, it may be worth consolidating them into a single account to reduce fees and make managing your superannuation easier.
- Consider seeking professional advice: It may be helpful to seek advice from a financial planner or tax specialist to ensure you manage your superannuation effectively.
Managing your superannuation as a non-resident requires careful attention to compliance and regulatory requirements and focusing on your long-term financial goals. You might even run into several issues during this process.
Common Superannuation issues faced by expats
As an expat, managing your superannuation can be challenging, especially when navigating different tax laws, investment options, and compliance requirements. Here are the main points for common superannuation issues faced by expats:
- Currency exchange rates can impact the value of superannuation contributions and withdrawals, especially for expats making regular contributions from overseas.
- Communication issues can arise due to the distance, making it challenging to keep super funds updated with contact detail.
- Investment options may be limited, especially for international investments, and some expats may prefer to invest in assets in their home country.
We suggest seeking professional guidance and staying up-to-date with superannuation policies and regulations to tackle these hurdles successfully.
If you’re having a hard time deciding between continuing contributions to your super or stopping to invest elsewhere, Odin can assist you in efficiently managing your savings to the best outcome for your personal circumstances.
Contact us today for our expert assistance.
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Frequently asked questions
As an Australian expat living overseas, you can access your superannuation savings once you reach your preservation age (55 to 60). You also need to meet certain conditions of release, such as retiring, starting a transition to a retirement income stream, or suffering from a permanent disability.
However, the process and eligibility criteria will depend on your superannuation provider.
If you are a temporary resident in Australia, you may be eligible to claim your superannuation benefits when you leave the country permanently by applying for a Departing Australia Superannuation Payment (DASP) from the Australian Taxation Office (ATO).
However, if you are an Australian citizen or permanent resident leaving Australia permanently, you will generally not be able to access your superannuation savings until you reach your preservation age and meet certain conditions of release, such as retiring or having a permanent disability.
In some exceptional cases, you can get early access to your superannuation savings if you have a terminal medical condition or are allowed on compassionate grounds.
Non-residents who have worked in Australia and meet specific eligibility requirements may receive superannuation payments. If you leave Australia, you can leave your superannuation account open or request it be paid.
However, you may be eligible for different tax concessions than Australian residents. You may be subject to tax on superannuation payments depending on your country of residence and the tax treaty arrangements between Australia and your new country.