The ability of Australian expats contributing super whilst living overseas is something we’re often asked about.
There continues to be a great deal of misinformation and uncertainty on the subject and so we have prepared a short guide to dispel some of the myths and to allow Australian expats to make informed decisions with respect to their superannuation contributions.
Impact on tax residency status
An individual’s tax residency status is a question of fact and their specific circumstances will need to be assessed with consideration to all relevant factors.
There is a notion that contributing to superannuation may result in a non-resident becoming a resident for Australian tax purposes.
This factor in isolation would carry little weight and is highly unlikely to result in residence when considering the weight of other more relevant factors e.g., location of family, workplace, place of abode, etc.
Generally, an Australian expat contributing to super will not have a material impact on an individual’s tax residency status.
What are the main types of super contributions in Australia?
The main types of superannuation contributions that exist in Australia are as follows:
- Concessional Contributions
- Non-Concessional Contributions
- Downsizer Contributions
- Small Business Contributions
Each of the above contribution types will have a series of sub-set contribution types, which we will discuss below.
Concessional Contributions
Concessional contributions are contributions that are subject to the super funds’ “concessional” tax rate of 15% upon receipt.
Generally speaking, the money contributed has not been taxed before being received by the super fund and so it is taxed within the super fund.
Concessional contributions may include:
- Super guarantee contributions paid by an employer
- Salary sacrifice contributions paid by an employer from your pre-tax income
- Personal contributions claimed as a tax deduction
Australian expats are generally not paid a super guarantee payment and they don’t have the option of salary sacrifice as they are employed by an overseas organization.
Therefore, the more common type of concessional contribution made by Australian expats is personal contributions claimed as a tax deduction.
This allows expats to reduce taxable income in Australia by claiming the amount contributed as a tax deduction.
This is often suitable where an expat has an investment property in Australia generating taxable income.
All of the above super contribution types are acceptable as a non-resident Australian expat living overseas.
Careful consideration should be given if you reside in the United States. See our Contributing to Super while in the US guide here: https://atlaswealth.com/au/news/tax-treatment-of-superannuation-for-us-based-expats/.
Non-Concessional Contributions
Non-concessional contributions are not subject to tax upon receipt by the super fund as they are made up of post-tax monies (i.e., the money has already been taxed).
Non-concessional contributions may include:
- Personal contributions not claimed as a tax deduction
- Spouse contributions
- Government Co-Contribution
- Low-Income Super Contribution
Personal contributions not claimed as a tax deduction are most commonly used for boosting super savings and are available to Australian expats.
Spouse contributions, Government Co-Contributions, and Low-Income Super contributions are generally not effective while overseas as eligibility either requires Australian residence (e.g., for spouse contributions) or requires specific Income tests to be met where at least 10% or more of total income must come from employment-related activities in Australia (e.g., for Government Co-Contribution and Low-Income Super contributions).
Careful consideration should be given if you reside in the United States. See our Contributing to Super while in the US guide here: https://atlaswealth.com/au/news/tax-treatment-of-superannuation-for-us-based-expats/.
Downsizer Contributions
The downsizer contribution rules allow individuals who meet certain eligibility to contribute up to $300,000 from the sale of their existing or previous main residence into superannuation, and the contribution does not count towards the contribution caps.
To be eligible to make a downsizer contribution, the proceeds from the sale of the home must be either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption.
This means an individual would need to sell the property as an Australian tax resident and the property cannot be an investment property that was never previously a main residence.
Due to this, the downsizer contribution is generally not available to Australian expats who are non-residents for tax purposes.
You can read more about the downsizer rules here: https://atlaswealth.com/au/news/can-a-downsizer-contribution-strategy-assist-australian-expats/
Small Business Contributions
The small business contributions are available to individuals operating small businesses in Australia who dispose of eligible business assets.
Because of this, small business contributions will be available only to a minority group of Australian expats (if any).
In short, they are capital gains tax (CGT) concessions that allow the reduction of some or all of a capital gain from an active asset used in a small business, with the proceeds contributed to super.
The super concessions include:
- Small business 15-year exemption
- Small business retirement exemption
The key benefit of both concessions is the ability to contribute amounts to an Australian super fund without affecting non-concessional contributions limits. This allows more to be placed into the tax-effective environment of super.
Summary of Superannuation Contribution Options
We have summarized the above contributions in table form below:
| Contribution Type | Contribution Subset Type | Available to Expats? | Notes |
| Concessional | Super Guarantee (SG) contributions | Generally, no. | Subject to your employer. |
| Salary Sacrifice contributions | Generally, no. | Subject to your employer. | |
| Personal contributions claimed as a tax deduction | Yes | There are limits, see eligibility rules. | |
| Non-Concessional | Personal contributions not claimed as a tax deduction | Yes | There are limits, see eligibility rules. |
| Spouse contributions | No | Only available to Australian residents. | |
| Government Co-contributions | No | Subject to Income Tests. | |
| Low-Income Super contributions | No | Subject to Income Tests. | |
| Downsizer Contributions | Downsizer contributions | No | Only available to Australian residents. |
| Small Business Contributions | Small business 15-year exemption | Generally, no. | Complex area, seek tax advice. |
| Small business retirement exemption | Generally, no. | Complex area, seek tax advice. |
Concluding Comments
It’s important to note that superannuation and the tax and regulatory rules that govern the system can be highly complex.
The purpose of this guide is to offer a high-level summary of the types of contributions available to Australian expats who are non-residents for Australian tax purposes.
It does not cover all aspects that need to be considered when deciding to contribute to superannuation such as age and contribution limits.
As with all money held within the super fund, individuals will also need to meet a condition of release before being able to access the funds such as attaining age 60 and being retired or attaining age 65.
Therefore, it’s important to consider the suitability of contributing to super as an Australian expat against your situation and financial goals.
For those Australian Expats looking to return to Australia, superannuation remains a very versatile investment and tax-saving vehicle and Australian expats must understand their options around it.
If you would like to learn more about how you could be using your Australian super more efficiently, feel free to get in touch with one of our Financial Advisers through the Contact tab on our website.
