I am announcing today that, effective from 1 July 2008, all future superannuation contributions and balances for temporary residents will be required to be paid to the Australian Government which will hold them on behalf of those who are entitled to them.
This measure will enable the Government to establish a register of temporary residents’ superannuation, making it easier for them to locate and claim their superannuation. It will also ameliorate the problem of small balances becoming lost in the superannuation system and potentially being eroded by fees and charges.
Employers will still be required to pay Superannuation Guarantee contributions for temporary residents but will have the choice of continuing to make payments to a superannuation fund or paying contributions directly to the Australian Taxation Office (ATO).
As part of this measure, superannuation providers will be required to transfer annually the balances (including existing balances) of superannuation accounts held by temporary residents to the ATO.
Temporary residents who permanently depart Australia will be able to claim back their superannuation by contacting the ATO within five years of permanent departure (subject to existing withholding tax arrangements). Temporary residents who become permanent residents will be able to have their superannuation transferred back from the Government into a superannuation fund (with interest).
The new measure will not apply in respect of contributions or balances of New Zealand citizens.
Currently, the superannuation benefits of temporary residents remain in their superannuation fund unless the temporary resident requests payment after permanently departing. Where a benefit is paid, the taxable component is subject to a withholding tax (generally at 30%).
The Government will consult with affected stakeholders in settling the final legislative and administrative design of the measure. This will improve the underlying cash balance in net terms by $877 million over the forward estimates and is detailed as a measure in the mid year review.