In Australia, retirement income is funded through a mix of personal savings, a government pension and superannuation (super).
Super is made up of employer contributions, your own personal contributions and sometimes additional Government contributions. Money deposited into your super fund is invested by the fund’s trustee, who aims to grow your account balance while you are still working.
Because the Government wants you to save for your retirement, they provide tax breaks and other incentives to help grow your super savings over time.
When you have reached retirement age and stop working, your super fund is usually converted to a pension that will give you money to live on. This can be paid to you regardless of your country of residence and once you are over age 60 the money can be paid to you free of any Australian taxation.
There are two broad categories of superannuation contributions:
These are contributions for which a tax deduction is claimed. You can only claim a tax deduction against assessable Australian income.
These are contributions for which NO tax deduction is claimed. They are made from after-tax income, or overseas income/capital.
There are limits, or caps, on the amount of money that can be contributed each taxation year into superannuation. These are summarised below.
Transfers from foreign superannuation funds are not roll-overs, but are considered to be personal contributions of the member.
Carry-forward concessional (before-tax) contributions start
From 1 July 2019, super fund members can make catch-up concessional contributions into their super account using their unused concessional contributions cap amounts from previous years. To qualify, you must have a Total Super Balance of less than $500,000 on 30 June of the previous financial year and you must not have used all your $25,000 annual concessional contributions cap in the previous financial year.
Under the rules, you can carry-forward up to five years of unused concessional contributions caps for use in a later financial year, but the rolled forward amounts expire after five years.
The five-year carry-forward period started on 1 July 2018, meaning 2019/2020 is the first year in which you can make catch-up contributions. If you are aged 65 or over, the normal work test rules apply.
The Australian Financial Year runs from 1 July – 30 June.
It is possible for a member under the age of 65 to bring forward up to 3 year’s worth of non-concessional contributions in one year – allowing a contribution of up to $300,000.
|Financial Tax Year||Concessional Cap Limit in current tax year||Concessional Cap made in current tax year||Concessional Cap unused in current tax year||Concessional Cap that can be Carried Forward|
Member contributing MUST be between the ages of 18 – 64.
From age 65 – 74 you can contribute if you meet the work test. The ‘work test’ requires a person to have been gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in a financial year. Gainfully employed means employed or self-employed for gain or reward in any business, trade or profession.
The work test must be satisfied for an individual aged 65 or older to be allowed to make personal superannuation contributions.
No voluntary contributions can be made once an individual has attained age 75.
In order to transfer UK Pension Benefits the individual MUST be aged over 55.
Work Test Exemption
The work test exemption takes effect from the 1st July 2019 for an additional 12-month period from 30th June 2019 end of financial year. The work test exemption allows an individual to voluntary contribute to the Australian Expatriate Superannuation where the individual is aged between 65 to 74. The work test exemption is subject to the individual members’ total super balance being less than $300,000.00.
Tax File Number
In addition to the requirement to meet the age and work test a contributing member must supply an Australian Tax File Number in order to avoid penalty taxation being deducted from their superannuation entitlement.
A Tax File Number (TFN) can be obtained by any Australian tax resident and is retained for life. You can apply for a tax file number online if you meet these three conditions:
- You are a foreign passport holder, permanent migrant or temporary visitor.
- You are already in Australia.
- Your visa is one of the following:
- a permanent migrant visa
- a visa with work rights
- an overseas student visa
- a visa allowing you to stay in Australian indefinitely (including New Zealanders automatically granted a visa on arrival).
Foreign passport holders have a right to apply for a Tax File Number for a number of reasons – one of them is their intention to contribute to an Australian Superannuation Fund. Applying for a TFN is a simple process, but time consuming. Expect a minimum of 28 days processing time.
The Australian Expatriate Superannuation Fund is a complying Australian superannuation fund. If you’d like to learn more about the Fund or contributing to Australian superannuation please Contact Us.