You’ve received a wonderful offer to work overseas. You’re excited to graze the proverbial greener pastures, experience other cultures and meet new people. 

While working overseas can be a fantastic opportunity, you might be wondering what this move would mean for your Australian superannuation account. 

Can I still make super contributions while working abroad?

The short answer is yes. However, the mechanisms for contributing to your super will highly depend on whether you are a resident or non-resident while working abroad. 

If you are a resident working abroad

If you are working for an Australian employer and you still remain a resident of Australia for income tax purposes but based overseas, your employer will still be legally required to make super contributions on your behalf. There is a good chance this is the case if you will only be assigned to work abroad for a short period of time. This means that your super payments will continue automatically.

Additionally, there is also a chance that you will be required by your employer to make payments to a retirement scheme in the country you will work in, such as the social security system in the US or a pension fund in the United Kingdom.

To avoid doubling up on your retirement savings payments, your employer can request for a  “Certificate of Coverage” from the Australian Taxation Office (ATO). It states that employees are not liable to pay social security in the country in which they are currently working, on the basis that super contributions continue to be made for them in Australia. This is particularly beneficial to those working abroad for a short period of time, given that many social security benefits are only later accessible later in life and most expatriates will fail to qualify. 

Bear in mind that even if your employer is Australian, they may still be exempt from making super contributions on your behalf if: 

• You become non-resident of Australia for tax purposes; or
• The employing entity (company, partnership, individual etc) is a non-resident of Australia for tax purposes.

If you are a non-resident working overseas

Non-residents can continue to make superannuation contributions in Australia. As a non-resident, the amount you can contribute to your super in the financial year will be identical to that of tax residents in Australia.

According to the ATO, these contributions will generally be classed as non-concessional payments. The ATO states that you won’t have to pay additional tax to the Australian government when you make these payments. However, there is a limit to how much you can put into your super. To learn more about how much you can contribute, read here. 

If you have been transferred overseas and you become a non-resident member, your employer fund can potentially make provisions.

If you have a fund that is different from your employer or if your employer is non-Australian, you can notify your fund that you are moving overseas and you will be a non-resident. This is important since some funds (usually low-cost funds) will not provide services to non-resident members. In this case, you need to make arrangements to move or rollover your funds into another suitable fund. 

When making arrangements, take the time to ensure that your funds will be managed effectively and that mechanisms are in place that will allow you to make any necessary changes to your super while you are working overseas. It’s preferable that you can make any changes (e.g. change investment options) online and you will not be required to physically return to Australia for the process. 

 What if I have an SMSF? 

Making contributions to your self-managed super fund (SMSF) while working abroad can get a bit tricky. 

And it’s not just us that sees it that way. According to ATO, making contributions to an SMSF while you are abroad can be complicated. It’s essential that Australian super funds remain resident for tax purposes or be vulnerable to the possibility that they will be fully taxable on gains made within the super fund. 

This means that anyone with an SMSF who is moving abroad for a period of two years must get professional advice on how to best manage their affairs. If you have extended travel plans or there’s a possibility you may not return within the time frame, it is a good idea to explore alternative options for your retirement savings.

The first step you must take is to notify other fund members/trustees that you will be moving overseas. After this discussion, they can confirm they will continue to administrate it for you. Some super fund trustees won’t provide services for people who don’t live in Australia and you may be required to move funds. You have several options on how to proceed, including:

• replacing yourselves as trustees with personal representatives
• moving to what is called a small APRA fund or discontinuing the SMSF and;
• moving the funds into a public offer or retail superannuation fund.
     

Should I continue my payments while working abroad?

Would it be more advantageous or disadvantageous to continue your super contributions while working overseas? Some Australian expatriates choose to discontinue their contributions to Australian superannuation for a number of reasons, including:

• Many developed countries, including Canada, the US, UK and Europe have competitive pension systems that offer tax benefits. These systems may offer a much better earning power than making non-taxable deductible contributions to your super in Australia. There are, in some cases, pension funds that are transferable to Australia on an attractive tax basis. 
• It may be a more viable option to maintain investments outside of Australia in a zero tax environment then remit income from those investments at a later date (usually when an expatriate returns to Australia). However, bear in mind that recent changes to super contribution limits can make this process more difficult for larger amounts. 

Whether making contributions from overseas is necessary or advantageous will also depend on several factors, including the following: 

• The amount you can contribute from present period until your retirement
• Whether you have a spouse or partner (as this doubles the available amount of non-concessional contributions you can make to your super) 
• Your age (or your spouse or partner’s age). The differences in age may lead to different contribution process because your access age for super purposes will vary from each other 
• The nature of the investments you currently hold (if you choose to hold investments outside the country) and whether they can be transferred into a super fund. 
• Whether you intend to return to Australia following your working period overseas or you plan to settle in other countries. 

Before you choose to discontinue your super contributions, make sure to review your position with respect to your super and seek professional advice as early as possible. 

Conclusion 

Don’t forget to practice due diligence before you make any decision regarding your super when you choose to work overseas. The ATO suggests that you do your research on the taxation system in the country you’re set to work in and whether there are any taxes applicable to super contributions.

Be open to other retirement savings options that may be available to you. In some countries, you might be able to access the local retirement system which could offer lower taxes or can even charge zero taxes on contributions, then you can transfer your earnings to Australia at a later date. Your Australian super fund may even be open to accepting contributions made in other currencies, so don’t hesitate to discuss your options with your fund. The exact arrangements related to your super will depend on your specific situation, so don’t be afraid to seek out professional financial advice. 

 Have any questions about retirement and how to be better prepared for it? Explore nestegg to learn more.