Australia’s superannuation system is one of the most tax-efficient retirement schemes globally, and with over $3 trillion of assets sitting within the superannuation system, it is certainly one not to be ignored.
When it comes to Australian expats looking to repatriate to Australia, there is a great deal to consider when it comes to your superannuation. This includes reviewing insurances held within your superannuation account, exploring unused contribution caps to your superannuation fund, salary sacrifice contribution strategies if you’re planning to work in Australia again, transitioning to retirement strategies and even consolidating your overseas assets into your superannuation fund.
Under the current rules, you can have up to A$1.7 million each inside your Account Based Pension, which would allow you to withdraw a tax-free amount each year in Australia. For a couple, this means that you could have up to A$3.4 million inside superannuation, which at a 5% withdrawal rate would provide you with A$170,000 per year, or A$14,167 per month for those of us who tend to think in monthly figures, of tax-free income.
It’s easy to see why superannuation can be an attractive retirement tool, so let’s explore some of the key aspects of super for repatriating Australians.
Reviewing your insurance inside the superannuation
Under the current rules in Australia, you can hold Life, Total & Permanent Disability (TPD), and some Income Protection insurance policies inside your superannuation fund. This can provide some benefits such as not having to pay for these policies from your non-superannuation assets (such as your cash in the bank), however, it’s also important to recognise that this is eroding your retirement savings, and may, in some cases, not be the most cost-effective strategy for holding your insurance policies.
In many cases, we find that holding an insurance policy via an insurer in Singapore in Australian Dollars (AUD) on a level premium can be a sensible long-term strategy to continue to cover you whilst back in Australia, and avoids having to erode your superannuation balance. If you do already hold insurance inside your superannuation, or even outside in Australia, it could be worthwhile exploring your insurance options in Singapore to see if there are any savings available to you.
Exploring salary sacrifice strategies to your superannuation fund
If you’re planning to work in Australia again, exploring salary sacrifice options to boost your retirement savings via superannuation and reduce your tax liability in the country can certainly prove worthwhile. A salary sacrifice strategy allows you to nominate an additional portion of your before-tax income to contribute to your superannuation fund, thereby reducing your taxable income, and boosting your retirement savings. There is a contributions tax of 15% to be paid when transferring this amount to superannuation, however for most this is significantly lower than your personal tax rate.
Given that there are caps on the superannuation concessional contribution of A$27,500 per year, which includes your employer contributions, it’s important to review how much you can put into superannuation each financial year with your Financial Planner and/or tax agent.
Utilising unused concessional contribution caps for your superannuation
Since 2018-19 you have been able to accumulate your unused concessional contributions for a maximum of 5 years based on the contribution limit of that particular year. For example, if you didn’t contribute anything last financial year and the limit was A$27,500, assuming that the limit this year is also A$27,500, this means that you could potentially contribute up to A$55,000 this financial year. It’s important to review the eligibility criteria here and explore if this strategy is going to be right for you.
You can check out your unused concessional contribution limit via your myGov account. You need to ensure that your tax portal and superannuation information are flowing through to your myGov account to be able to access this information.
Accessing the Bring-Forward provision to consolidate assets into superannuation
For many returning Australian expats, you may have investments overseas, savings in various overseas accounts, company stock that has vested, or even overseas pension accounts. It’s important to review your options either before you board the plane to Australia as to what can be contributed to superannuation and what can’t be. In the instance of overseas pensions, it’s important to review whether they can be rolled over to Australian superannuation or if they instead must be withdrawn and treated as a contribution. For savings, shares, and company stock, this would form part of your non-concessional or concessional contribution limit.
The non-concessional limit is currently A$110,000, and by utilising the bring-forward provisions you could contribute 3 years in one go, meaning that you could contribute up to A$330,000 at once, or A$660,000 for a couple providing that you do not make any further non-concessional contributions for the next two years. There is a great deal to consider when it comes to the treatment of overseas assets such as:
– Tax on any future capital gains once you’re an Australian tax resident;
– Reporting requirements as part of your tax return;
– Tax obligations on any foreign exchange gains if held in another currency;
– Restrictions on holding overseas assets for Australian residents.
Given the complications with overseas assets, it’s a sensible idea to seek professional advice here from your Financial Planner and explore your options. Transfers made to superannuation from overseas, for example, are generally treated as tax-free by the ATO providing that they’re made within 6 months of gaining residency, however again it’s important to ensure you seek advice here.
If you’re planning on repatriating to Australia, or simply want to explore the options, reach out early and start planning today.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to Australian professionals in Singapore. Jarrad Brown is an Authorised Representative of Global Financial Consultants Pte Ltd – No: 200305462G | MAS License No: FA100035-3
Australian Expatriate Group is a division of Global Financial Consultants in Singapore providing specialist advice to Australians living abroad.
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.
*Please note that Jarrad Brown is not a tax agent or accountant and none of the content outlined here should be taken as personal advice. You should consult your tax agent and financial adviser to review your current personal finances and financial goals to consider whether this strategy is appropriate for you.