Maximizing Australian Superannuation: New Rules and Opportunities for Expats Returning Home in 2024
Recently we have been working with executive who has been working in Asia for 15 plus years planning on returning to Australia.
The question was how he can supplement his foreign superannuation plan maximising his Australian super plan contributions.
As an Australian expat away from Australia for 15 plus years, what are the Australian superannuation basics?
Here they are as of May 2024.
For the year 2023/24 Concessional (tax deductible) contributions $27,500 per person can be made to an Australian Complying Superannuation Fund.
Non-concessional (Not tax deductible) cap of $110,000 per year (and 3-year bring-forward capped rule allowing a contribution of $330,000 per person).
From 1 July 2024 indexation applies and the new indexed caps are.
$30,000 for concessional contributions; and
$120,000 for non-concessional contributions. The 3-year bring forward rule will increase to $360,000.
The age 65-year rules (maximum age for contributions) has expanded to age 67 and from 1 July 2022 to (just before) age 75.
Note the “work test” applies to non-concessional contributions at age 67 to just before age 75 years. (You cannot make contributions between 67-75 if you are not working).
In addition, “excess concessional contributions” (the contribution limits outlined above) will be taxed at the individual’s marginal Australian tax rate (i.e. for a non-resident that is 32.5% on the first $120,000 of taxable income) less a 15% tax offset for the tax paid by the fund trustee.
Excess non-concessional contributions made on or after 1 July 2013 may be withdrawn from the superannuation fund to avoid the extra tax on the excess contribution.
The Pension Cap Transfer rules are indexed from 1 July 2024 to $1.9 million of capital can be transferred (by “segregation”) within the complying Australian Superannuation Fund to the “pension account” and withdrawn as a tax-free pension from age 60 years and get the benefit of no tax on earnings and capital gains.
Comment
Contributions towards the superannuation balance of $1-9 million balance for say a husband and wife (ultimately withdrawn as a pension offer the benefit of no tax on earnings and capital gains) can be funded by non-concessional sums of $120,000 per annum per person from 1 July 2024 ( with an opportunity for additional contributions using the “ 3-year bring-forward rule” capped at $360,000 per person).
There may also be an opportunity to contribute concessional (Pre-Tax) contributions being $27,500 per person per annum to 30 June 2024 and indexed to $30,000 from 1 July 2024
The basics ($3m super tax) As of May, 2024 this is not yet law
Individuals with balances exceeding $3 million will be subject to an additional tax of 15 per cent on the earnings on any balance that exceeds the $3 million threshold.
The proposed tax will be assessed personally, and wealthy members may pay the tax personally or by authorising ATO to access their superfund account.
Individuals with total superannuation balances (TSBs) over $3 million at the end of a financial year will be subject to an additional tax of 15 per cent on earnings. This tax is in addition to any tax their superannuation funds pay on earnings in accumulation. As announced, the $3m threshold is not indexed.
The proposed new rules do not apply to foreign superannuation funds with the rules proposed to start date: 1 July 2025
Comment
Assuming your superannuation plan balances are modest and given the superannuation caps (Currently $ 1.9 million), the $3 million dollar will only be relevant to plan members with “legacy Australian superannuation plans “with balances more than $3 million.
Regards,
Dale Hoy
m) +61 419 364 994
#ExpatAustraliantax # Australiantaxresidency #foreignsuperannuation
PS If of interest, Book a private conversation with me at your convenience
