Understanding Repatriation with the Dubai Employee Workplace Savings (DEWS) System for Australian Expats
The Dubai Employee Workplace Savings (DEWS) system, introduced in 2020, offers a financial savings plan for employees working within the Dubai International Financial Centre (DIFC). Unlike the traditional end-of-service gratuity, which paid a lump sum upon an employee’s departure, DEWS provides a structured, long-term savings option. While participation in the DEWS system is currently voluntary, it could become mandatory in the future, making it essential for Australian expats working in Dubai to understand how it works, especially when it comes to repatriation.
How the Dubai Employee Workplace Savings (DEWS) System Works for Australian Expats
The DEWS system is designed to help expatriates in Dubai save and invest for the future. Here’s how it operates:
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Employer Contributions
Employers in Dubai contribute a percentage of the employee’s salary to the DEWS fund on a monthly basis, which replaces the traditional end-of-service gratuity system. The contribution rate is as follows:
- 1 to 5 years of service: 5.83% of the annual base salary.
- Over 5 years of service: 8.33% of the annual base salary.
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Employee Contributions (Optional)
Employees can choose to make additional voluntary contributions to their DEWS fund to further increase their savings.
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Investment Options
Employees can choose from a range of investment options, selecting portfolios that range from low-risk to higher-risk based on their financial goals and risk tolerance.
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Regulation and Transparency
The DEWS system is regulated by the DIFC Authority and managed by professional fund managers. This ensures that the funds are handled with transparency and in line with global standards.
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Portability
Unlike the traditional end-of-service gratuity, DEWS savings are portable. This means that if you leave one employer and join another within the DIFC, your DEWS balance can be transferred to your new employer’s fund.
Tax Implications of the Dubai Employee Workplace Savings (DEWS) System Upon Repatriation
If you’re an Australian expat returning home after working in Dubai and participating in the DEWS system, it’s crucial to understand the tax implications upon repatriation.
Foreign Superannuation and Taxation in Australia
Generally, foreign pensions are subject to taxation in Australia when derived by an Australian resident. However, the Australian Taxation Office (ATO) classifies foreign savings schemes, like DEWS, under certain criteria. According to the Superannuation Industry (Supervision) Act (SIS Act), a superannuation fund is defined as:
- An indefinitely continuing fund.
- A provident, benefit, superannuation, or retirement fund.
Since the DEWS scheme allows employees to access their funds before retirement, the ATO may classify the DEWS balance as income rather than a retirement fund, potentially subjecting it to higher taxation upon withdrawal.
Key Tax Considerations for Australian Expats with the Dubai Employee Workplace Savings (DEWS) System
- Timing of Withdrawal: The timing of when you withdraw your DEWS savings is critical. The ATO may consider the withdrawal as income, and any earnings generated before the date of your repatriation could be taxed at your Australian resident tax rate.
- Leaving Funds Invested: If you decide to leave your funds in the DEWS system and withdraw them later, you will still face taxation on any earnings generated up until the withdrawal date. This can result in higher tax liabilities and additional accounting fees to ensure accurate reporting.
Tax Strategy for the DEWS System and Repatriation
When planning your repatriation, consider the tax impact on your DEWS balance. Timing your withdrawal or choosing to leave the funds invested in the DEWS system can have a significant effect on your overall tax bill. It’s essential to seek professional advice to understand the most tax-efficient strategy for withdrawing or transferring your DEWS savings upon returning to Australia.
Final Thoughts: Dubai Employee Workplace Savings (DEWS) system and repatriation
The Dubai Employee Workplace Savings (DEWS) system is a valuable savings tool for expatriates working in Dubai, but understanding its implications when returning to Australia is essential. By being aware of the tax consequences and making informed decisions about withdrawing or transferring your DEWS savings, you can avoid unexpected tax bills upon repatriation.
For personalised advice and guidance on managing your DEWS savings and ensuring a smooth tax transition, contact us. Our experts can help you navigate the complexities of international financial planning and repatriation.
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