Defence Superannuation for Australian Expats: Key Considerations & Options
As an expat financial adviser and a veteran of the Australian Army, I often receive questions about military superannuation and how it applies to Australian Defence Force (ADF) members living overseas. This article breaks down the different types of Defence Superannuation and what Australian expats need to know to manage these benefits effectively while living abroad.
Understanding the Different Types of Defence Superannuation
For members of the ADF, there are three primary types of military superannuation schemes. Each superannuation scheme offers different benefits, and the eligibility depends on when you joined the ADF.
- Defence Force Retirement and Death Benefits Scheme (DFRDB)
- Military Superannuation and Benefits Scheme (MSBS)
- ADF Super
Defence Force Retirement and Death Benefits Scheme (DFRDB)
The DFRDB is a defined benefit superannuation scheme that applied to ADF members who joined before 1 July 2016. Under the DFRDB, members receive a retirement benefit based on years of service, salary, and age at retirement. The benefit is a percentage of the final salary, with an increase for each year of service. Members also have the option to make additional contributions to enhance their benefit.
Military Superannuation and Benefits Scheme (MSBS)
The MSBS is a defined benefit scheme for those who joined the ADF on or after 1 July 2016. This scheme replaced the DFRDB for new members. Under MSBS, benefits are calculated as a percentage of the final average salary, with the percentage increasing based on years of service. The scheme has three primary components:
- Personal and employer contributions
- Fund contributions
- A lump sum from Defence when claimed
ADF Super (Members Choice)
The ADF Super is a defined contribution scheme for members who joined after 1 July 2016. Unlike the DFRDB or MSBS, ADF Super allows for more flexibility as it provides members with the ability to choose their investment options and move their super into another fund at any time. The ADF Super includes a fortnightly contribution of 16.4% of your income, which is a significant contribution toward retirement savings.
What Australian Expats Need to Consider About Defence Superannuation
As an Australian expat, one of the key aspects of managing your Defence Superannuation is understanding how it will be taxed in your country of residence. Fortunately, superannuation is generally agnostic to your tax residency status, meaning it is treated the same regardless of where you live—whether in Singapore, Hong Kong, the UK, or anywhere else. However, the local tax jurisdiction will have a significant impact on how your super is taxed, particularly in countries like the US where superannuation can be heavily taxed depending on the fund type and its management.
Step 1: Understand How Your Super is Taxed Locally
Your first step as an expat is to research how your Defence Superannuation will be taxed in the country where you reside. For example, the US has strict regulations that could impose heavy taxation on the composition of your super.
Step 2: Regularly Review Your Super
Many Australians, especially those living overseas, tend to neglect their superannuation accounts, leaving them in default investment options. However, you should regularly review your military superannuation to ensure it aligns with your current financial goals, especially as you approach retirement age (55-60) in the MSBS scheme. Updating the investment options within the accumulation component of your super can lead to increased returns over time.
Tailoring Your Financial Plan as an Expat
If you’re an Australian veteran working overseas—whether in private security, flying for an international airline, or living another expat lifestyle—it’s important to create a financial plan. This plan should consider both your Defence Super options and your life abroad. Working with an adviser can help you integrate Australian and expatriate financial factors into a comprehensive retirement strategy.
Final Thoughts: Defence Superannuation for Australian Expats
Managing Defence Superannuation while living overseas requires attention to both your superannuation options, and the taxation laws of your country of residence. Whether you’re part of the DFRDB, MSBS, or ADF Super, understanding how these schemes work and how to optimise them for your expat lifestyle will set you up for a comfortable retirement.
If you’re an Australian expat with questions or would like tailored advice on managing your military superannuation, don’t hesitate to get in touch. Together, we can build a financial plan that addresses both your super and broader financial needs as an expat.
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