65% Tax on Superannuation for WHM Visa Holders in Australia

mbg

Good morning,

To summarise - I'm potentially going to have to pay 65% of tax on 4 years of superannuation accumulation due to the fact that I briefly held a specific visa type 5 years ago, even though that was before the law existed, and wasn't when the vast majority of the superannuation was earned.


In detail - I'm a British Citizen who was a temporary resident in Australia for 4 years. For the first 6 months, I was on a Working Holiday visa, and then moved to a Student then a Graduate visa for the remaining 3.5 years.

Throughout this time, my superannuation was accumulating at approx 10% of earnings. However, having now returned to the UK, I'm eager to consolidate my Australian super with my UK pension.

However, the Australian Tax Office introduced a 65% tax rate on Departing Australia Superannuation Payments (DASP) for anyone who ever held a Working Holiday visa while in Australia. This is not just applicable for the super accumulated while on the specific visa (which seems fair), but for all super ever accumulated. Consequently, I'm now potentially subject to an additional 20-30% tax over the usual DASP rate of 35-45% for my entire pension saving over a 4 year period.

It's also worth noting that this policy was introduced after I'd transitioned from the Working Holiday visa, so is being applied in a way which is after-the-fact. For more info on the policy see the ATO site (I can't add a link as it's my first post).

Does anyone know whether there is any scope to challenge this? My understanding was that the UK and Australia aimed to work together to avoid double-taxation etc. The entire scenario seems incredibly unjust.

[Deleted User]

You'll need to do some googling it there was a recent court case about this and the British citizen won. Can't remember the exact details but it was about double taxation

Marcon

This? https://www.bbc.co.uk/news/world-australia-50230702

mbg

Thanks for the quick reply _shel. The recent case you mention was related to the same visa type, but another issue (the "backpacker tax" of not providing a tax free threshold) rather than the 65% super tax, which seems to be floating under the radar...

mbg

Hi Marcon, that's a different one which is related to income tax, not the 65% tax on the Departing Australia Superannuation Payment for any Working Holiday Maker.

Joey_Soap

I have looked very carefully at the DASP too. My conclusion is that it is indeed punitive and unfair. But I don't see a way legally around it. The only option I can see would be to leave the money invested in the Super Fund in Oz. Presently, in Oz when you draw Super Fund income, it is tax free in Oz but will be taxed in the UK if you are a UK tax payer as a pensioner. I doubt there is any good news here actually, but good luck.

[Deleted User]

sorry about that, it sounded similar. But yes leaving it in aus seems the better option to get your whole fund back. You planning on returning there later?

Andrew31

This happened to me. I was a back packer in 2001 and got some super benefits accrued, but not much.

Then went back on a 457 in 2014 and built up decent benefits. Which i then withdrew in 2018 when i came back to uk.

Initially i got taxed 65%, but emailed my super company and they immediately adjusted it to 38% the next day and gave me an additional sum of money. The loophole is there somewhere, but cant quite remember how i did it. I will look through some emails.

mbg

Thanks Andrew31, if you could find a solution in your emails that would be excellent... I don't intend to return to Australia, and as I don't have Permanent Residency, any super I leave will be handed over to the ATO to earn interest of CPI-only.

Andrew31

I looked, my super company charged me 65% i sent them an email saying i was on a 457 and should have been 38%, they adjusted and sent me the remaining funds 2 days after the original. It was sent to an AU Bank account and I immediately transferred to the UK.