Aussie Super changes: the pot of gold at the end of a very short rainbow for foreigners

Written by Dale Hoy July 2016

Aussie super, once touted as the best savings scheme in the world is, like all good things being wound back by the Government.

Of course if you are a foreigner there is no way in the world you would ever voluntarily join an Aussie superfund. Budget changes will wind back annual contributions to a paltry A$25K per year, cap contributions to a lifetime $500K of your own money, limit entry of capital to tax-free pensions to just $1.6M AND reduce from $300K to $250K the “higher income earners”  income threshold for the 30% tax rate on contributions.

So what’s the pot of gold for foreigners? Well there are NO caps under Aussie rules on contributions (by you or your employer) to a foreign super scheme and for the employer there is an exemption from Fringe Benefits Tax but it is also not tax-deductible (which means the effective tax rate is 30%).

So long as neither you nor your spouse are Aussie citizens or permanent residents, foreign super offers from the Australian tax perspective an attractive means of funding your retirement. You may still get fleeced by the Aussie tax man on compulsory Aussie super, but you can quietly fund your foreign super retirement plans free from the restrictions of Aussie Super.

Want to know more?

Are you a non-resident of Australia or a sitting duck for the Aussie tax man?

Australian tax law is complex, but it’s been around for a long time. It is no surprise the High Court has laid down rules of law for determining whether Australian citizens have ceased to reside here. As long ago as 1946 Miller’s case held that “resides” bears its ordinary meaning; to dwell permanently or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place. Now in case you are thinking because you live in Hong Kong the Tax Man won’t come after you, Gregory’s case in 1937 held the well settled interpretation of the words (resides) includes in this application a man who resides in two or more places.

So, if you have a home in Australia or your spouse/family live in Australia, the Tax Man may be interested. Try this (very) simplistic test; do you live offshore and visit Australia or do you live in Australia and commute to work offshore? Residency is a question of fact and maybe your somewhere in the middle of this little test. If you’re a bit unsettled get some good professional advice.