Employers and trustees of superannuation funds.
What do you need to do?Consider the impact of the proposed legislation on your business. We can assist you with this process.
Partner
T +61 2 9296 2129
Sydney
John Edstein
Andrew Gray
Melbourne
Murray Kellock
Author
Michael Chaaya
Following an extensive consultation period which commenced with the release of a discussion paper on 5 May 2008, the Government yesterday introduced legislation into the House of Representatives which addresses the number of lost accounts and unclaimed money in the superannuation system which is referable to temporary residents who have departed Australia.
The proposals are set out in the following Bills:
- Temporary Residents' Superannuation Legislation Amendment Bill 2008 (primary Bill), and
- Superannuation (Departing Australia Superannuation Payments Tax) Amendment Bill 2008 (Tax Bill).
The Bills are designed to implement the Government’s policy measure of minimising the number of lost accounts and unclaimed money in the Australian superannuation system that can arise when temporary residents leave Australia without taking their superannuation benefits with them.
In general terms, the amendments contained in the primary Bill:
- extend the definition of unclaimed money to include the superannuation of a person who was previously a holder of a temporary visa, where at least six months have passed since the person’s temporary visa ceased to be in effect and they have left Australia
- will require trustees of superannuation funds that hold unclaimed money amounts for departed temporary residents to pay those amounts to the Commissioner of Taxation, and
- allow temporary residents who have departed to recover any amounts paid to the Commissioner of Taxation as unclaimed money where certain conditions have been satisfied.
Individuals who hold an eligible temporary resident visa are currently able to access their superannuation benefits early (prior to reaching preservation age) in circumstances where their visa has expired or been cancelled and they have departed Australia. They do so by applying for a departing Australia superannuation payment (DASP).
Where a temporary resident recovers amounts paid as unclaimed money from the Commissioner of Taxation, the payment is considered a DASP and is subject to a final withholding tax. The provisions in the Tax Bill raise the DASP tax rates in the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 by five percentage points. The increase is aimed at allowing the Government to recoup the tax concessions afforded to the superannuation of temporary residents who have departed. In summary, the final withholding tax rate on the taxed element of a DASP will increase to 35% (up from 30%) and on the untaxed element of a DASP will increase to 45% (up from 40%).
The changes as set out in the Bills are significant and represent a major departure from the Government’s original plans as set out in the May consultation paper. Employers and trustees of superannuation funds should closely consider the impact of the proposals on their activities and determine whether any procedures or policies need to be adapted to accommodate the proposed changes.