25/09/2014

Temporary residents are entitled to a refund of tax when they leave Australia permanently, but not everyone is eligible.

The tax refund for Division 293 is not available for all "temporary residents" as it is a tax on superannuation for "very high income" earners.

The 293 tax is tax on superannuation for "very high income".  An individual's superannuation exceeding that "very high" amount would have their super tax concession halved, the difference between the concessional tax rate and the reduction is payable as a tax.  

Temporary residents are entitled to a refund of the tax when they leave Australia permanently because their Departing Australia Superannuation Payment (DASP), which temporary residents receive as their superannuation benefit when they leave Australia permanently, is not taxed under the Income Tax Assessment Act 1997 ("Tax Act") but taxed under the Superannuation (Departing Australia Superannuation Payments Tax) Act.

As the latter is not subject to 293 tax, any persons who receive the DASP are entitled to a refund of any 293 tax accrued for current or future liabilities already paid.

While this refund seems simple enough, its operation requires great caution as some temporary residents may not be entitled to the refund.   An individual that is a temporary resident for visa purposes, governed by the Migration Act, might not be entitled to the 293 refund, this is because eligibility for the refund requires temporary residency as defined by the Tax Act, and not the Migration Act.

The Tax Act notably differs by defining temporary residents as holding a temporary visa under the Migration Act, but also not an Australian resident, nor has a spouse who is within the meaning of the Social Security Act.

Evidently there would be numerous occasions of discrepancy between the two definitions, and some departing temporary residents may not be eligible for the 293 refund.  

Hence, make certain that when departing from Australia permanently the ATO won't be sending a pile of paperwork in pursuit.

For more information, call Townsends Business & Corporate Lawyers on (02) 8296 6222.