If you’re an Australian citizen returning to Australia to retire after living and working abroad, you probably have a few questions about superannuation. Rightfully so, as the superannuation system can become particularly complex on its own, let alone when you’re bringing foreign pensions into the mix.
Have no fear, though; this article will go through everything you need to know when it comes to navigating Australia’s superannuation rules for returning citizens, as well as practical steps to help you optimise your retirement savings upon your return to Australia.
Who Counts as an Expat?
Before we dive into the nitty-gritty, it’s first best to understand exactly who falls under this umbrella. An expat (or expatriate) is someone who lives outside their home country. In Australia, many expats are returning citizens or permanent residents, while others are foreign nationals (individuals who are not citizens of the country in which they are living).
Your Tax Residency Status
Your tax residency status in Australia significantly impacts your superannuation, particularly how you contribute to and access it. For this reason, it’s important to understand the superannuation residency rules for each status. We’ll go through each below.
Australian Resident for Tax Purposes
Generally, you are an Australian resident if you live here permanently, reside here, have a home here, or are present for more than half the income year. The Australian Taxation Office (ATO) uses four key tests to determine your residency. If you pass any one of these tests, you are considered an Australian resident for tax purposes.
- Resides Test
- Domicile test
- 183-Day test
- Commonwealth Superannuation Test
As an Australian resident for tax purposes, you are able to make full, tax-deductible super contributions, which you are not able to access until you reach age 65 or retirement. Being an Australian resident for tax purposes also unlocks specific concessions, including government contributions and spouse contribution tax offsets.
A Foreign Resident for Tax Purposes
Foreign residents for tax purposes are individuals who work in Australia but do not meet any of the ‘residency’ tests listed above. As a foreign resident for tax purposes, you still have and contribute to an Australian super fund, and are generally eligible for employer super guarantee (SG) payments, provided you are working for an Australian employer. However, it is important to note that you do not receive any of the tax benefits mentioned above (government contribution or spouse contribution offsets).
In terms of accessing superannuation, foreign residents for tax purposes must meet the same conditions of release as a resident (e.g., reaching 65 or retirement).
A Temporary Resident for Tax Purposes
A temporary resident for tax purposes refers to any individual on a temporary visa (student, 482, 485, etc.), and neither you nor your spouse is an Australian resident, as referred to in the Social Security Act 1991. If you are a temporary resident, you are eligible for the employer SG payments, but you are typically excluded from receiving government co-contributions.
In terms of access, a temporary resident for tax purposes can access their superannuation (and any earnings and other contributions) as a single lump sum called a departing Australia superannuation payment (DASP) after they leave.
Super Considerations for Expats Returning to Australia
Returning to Australia after living overseas requires a solid understanding of how your superannuation has been affected. Some key considerations to keep in mind are:
If You’re a Citizen Who Lived & Worked in Australia Before Moving Abroad, Your Super Will Stay in Your Nominated Account
As an Australian citizen or permanent resident moving abroad, your super will remain in your nominated Australian fund, subject to the same release conditions as if you were still in Australia. For seamless access when you return to retire in Australia, it’s recommended that you consolidate your super accounts before you leave or upon your return.
You can continue to make voluntary contributions to your superfund when you’re overseas. In fact, it is recommended to make voluntary payments while you’re overseas to reduce the risk of unclaimed super, which typically happens when super accounts are inactive.
Australians Can Contribute to Their Super While Living & Working Overseas
Overseas employers have no obligation to pay into your Australian super. Thereby, if you want to keep your balance growing (and reduce the risk of unclaimed super), you must make voluntary personal contributions, which you can do in two ways:
- Concessional (Personal Deductible) Contributions: Contributions made to your super fund before tax is deducted from your income. Taxed at a concessional rate of 15% when they enter your fund. Must submit a “Notice of intent to claim a deduction” form to make them taxable.
- Non-Concessional (After-Tax) Contributions: Voluntary contributions made from money you’ve already paid tax on (e.g., your overseas salary or savings).
You Must Transfer Your Overseas Pension Within Six Months of Becoming an Australian Resident for Tax Purposes
The tax treatment of lump sum withdrawals directly from foreign pensions or super funds will depend on whether you receive the payment:
- Within six months of becoming a resident
- Within six months of ceasing employment overseas
- More than six months after becoming an Australian resident or ceasing foreign employment.
A lump sum payment made to your Australian super fund within six months of ceasing employment overseas or becoming a resident is generally tax-free. This is because the ATO treats the entire amount as “non-assessable non-exempt income”, meaning you pay 0% tax on the transfer. This prevents growth hoarding and also gives returning expats time to settle back into their lives here in Australia.
In contrast, if you miss the six-month window, you must pay tax on the “Applicable Fund Earnings” (AFE), aka the growth that is added to your personal taxable income for that year. This is the fund’s growth in value from the day you became a resident to the day the money is transferred.
Advice For Expats Returning to Retire in Australia
Returning to Australia to retire involves navigating Australia’s complex superannuation rules to ensure your retirement savings are tax optimised and compliant with ATO regulations.
Upon your return to Australia, we recommend:
- Updating your tax residency status with the ATO, your bank, and your superannuation fund for your return to Australia.
- Ensuring the transfer of your overseas pension to your Australian super is complete within 6 months of your return to Australia.
- Searching for lost or unclaimed super by linking the ATO to MyGov and viewing lost or ATO-held accounts, or contacting the ATO’s automated super search line.
- Consolidating all super accounts into a single high-performing fund for seamless super contributions and management after returning.
Disclaimer: This article provides general information only and does not constitute personal financial, taxation, or legal advice. Superannuation and tax residency laws in Australia are complex and subject to change. Before making any decisions regarding your overseas pensions or Australian superannuation, you should consult with a qualified financial adviser or registered tax agent to ensure the information is appropriate for your specific circumstances.
