Superannuation - Expired PR and Tax

[GeeBee]

Hi all,

Currently enjoying life in Aus on a TSS visa, 1 year in.

Our current plans are to move back to the Uk after a couple more years, to try for a kid. I’ve toyed with the idea of applying for a 190 PR visa to keep our options open but realistically if we did go to back and have a child (not guaranteed, I know) I can’t see us returning before the travel component of the PR expires. It feels a fair chance therefore its a waste of money and effort. 

I had a thought regarding superannuation though:

when leaving on a temporary visa I can claim back my super minus 45% tax. However this tax is already not far off the cost of applying for PR  at the moment and will increase over however longer we stay in Aus. 

Babies and life choices aside and looking at the financials alone, I’m wondering if one reason for me to apply for PR is to lock in the super as a small investment until I retire and be able to claim it without being taxed. I would have to assume that my PR would expire before I retire and that I settle in the UK in later life. If this happened Would the super still be available via an Australian bank account and tax free?

Obviously there’s other benefits to applying to PR but is there logic is this approach from the financials? 

thanks

 

 

[Collie]

1 hour ago, GeeBee said:

Hi all,

Currently enjoying life in Aus on a TSS visa, 1 year in.

Our current plans are to move back to the Uk after a couple more years, to try for a kid. I’ve toyed with the idea of applying for a 190 PR visa to keep our options open but realistically if we did go to back and have a child (not guaranteed, I know) I can’t see us returning before the travel component of the PR expires. It feels a fair chance therefore its a waste of money and effort. 

I had a thought regarding superannuation though:

when leaving on a temporary visa I can claim back my super minus 45% tax. However this tax is already not far off the cost of applying for PR  at the moment and will increase over however longer we stay in Aus. 

Babies and life choices aside and looking at the financials alone, I’m wondering if one reason for me to apply for PR is to lock in the super as a small investment until I retire and be able to claim it without being taxed. I would have to assume that my PR would expire before I retire and that I settle in the UK in later life. If this happened Would the super still be available via an Australian bank account and tax free?

Obviously there’s other benefits to applying to PR but is there logic is this approach from the financials? 

thanks

 

 

I think what you're asking is can you leave your super in Australia to accumulate even if you are on a temp visa and leave Australia, thus avoiding the punative DASP tax.

Is that correct?

I'm open to correction but I think the answer is yes.  You can leave your super in Australia (to grow) when you return to the UK.

You then withdraw it on retirement (or when yoyr age allows) as per the rules at the time.

You will be taxed as per the rules of wherever you are tax resident at the time you receive the income.

[Marisawright]

As Colllie says, you can leave your superannuation in the fund as an investment until you retire and it will continue to earn interest.   If you've stopped working or have left the country, you just have to let them know and instruct them to cancel all insurances (which probably wouldn't be valid anyway).

Your next question relates to how you'll be taxed if you get PR and then take a lump sum when you retire.  It's quite a complicated issue and it might be worth a consultation with an expert. 

Certainly, a PR holder can withdraw their lump sum at retirement age and the Australian government won't take a penny in tax.  Unfortunately if you're living in the UK at that time, the Inland Revenue will swoop in and take a huge chunk, so you may be no better off.     

It's also worth checking whether the money you paid while on the 482 would still be labelled as being liable for DASP anyway.

Edited January 28, 2020 by Marisawright

[Ausvisitor]

On 28/01/2020 at 10:49, GeeBee said:

Hi all,

Currently enjoying life in Aus on a TSS visa, 1 year in.

Our current plans are to move back to the Uk after a couple more years, to try for a kid.

 

 

I might be wrong, but I think it's possible to have a child in Australia too. I mean I know they import a lot of their residents but surely they must "make" a few of their own locally ...

(Sorry, flippant comment I know)

Edited January 31, 2020 by Ausvisitor

[GeeBee]

thanks guys. Some further info I’m considering:

Note my tax figures above are incorrect. DASP taxes are 35% or 65%, not 45%

If you’re on a temporary visa and you permanently leave Australia you have 6 months to withdraw all your super through DASP (minus 35% tax for 457 and TSS/482 visas or 65% if you’ve earned on a working holiday visa at any point) . If you don’t withdraw it within 6 months the ATO will take *all of it*. 

So this is all only a consideration if you transitioning to a permanent resident from a temporary visa. 

As Collie and Marissa mention above, As a UK citizen it looks like the inland revenue do tax you on foreign pensions, so how much would depend how much you’re withdrawing and earning in the UK at the time. 

Personally I’m on a 482 visa. DASP tax would be 35%. UK tax you could limit to 20% if you don’t withdraw too much at once. Investing in getting PR and leaving the super where it is until retirement sounds like lowers tax, Covers the cost of the PR plus it’ll earn interest. depends how much is in the super though  

Worth noting if someone’s ever been on a working holiday visa (and perhaps now on a 457 or 482) all of the super gets taxed at 65% through DASP, even the money earned on the 457/482. In which case it’a more likely to be cheaper to just pay for a PR visa using the money you’d be paying in tax through DASP  

However, a key point Marissa points out is if the super earned while on a temporary visa may always be subject to DASP tax, so I’ll check up on that as that means it’s be taxed twice. Also I don’t yet know what options are for withdrawing super at retirement so I’ll look into that too.

[NickyNook]

Just to clarify - yes, the ATO will take your super if it's not claimed within 6 months but you haven't lost it for ever. You can still claim it - but you have to claim it from them rather than your Super fund.

[GeeBee]

Thanks Nicky. Useful bit of info that. I Had thought it was more than a little underhanded to give so little opportunity to claim back the super at the end of a temporary visa. 

[Collie]

2 hours ago, GeeBee said:

Thanks Nicky. Useful bit of info that. I Had thought it was more than a little underhanded to give so little opportunity to claim back the super at the end of a temporary visa. 

Yep, it's just reallocated from your super fund to the ATO.  It's to prevent it been eaten away by excessive fees.

I'm open to correction but I had thought that was nothing to do with your visa but rather whether your account is active or inactive i.e. happens to PRs and citizens too.  I thought it was 12 months of inactivity and simpling logging into your account makes it active (but I may be wrong).

[Marisawright]

1 hour ago, Collie said:

Yep, it's just reallocated from your super fund to the ATO.  It's to prevent it been eaten away by excessive fees.

I'm open to correction but I had thought that was nothing to do with your visa but rather whether your account is active or inactive i.e. happens to PRs and citizens too.  I thought it was 12 months of inactivity and simpling logging into your account makes it active (but I may be wrong).

Yes it is 12 months of inactivity but I’m not sure what constitutes activity