Can the amounts in fund B be taxed with the lesser tax rate rather than Working Holiday Maker (WHM) tax rate as defined in Subsection 301-175 (1) and (2) of the Income Tax Assessment Act 1997 (ITAA 1997)?
No This ruling applies for the following periods : Income year ending 30 June 20XX The scheme commences on: 1 July 20XX
In 20XX, you came to Australia, initially on a Subclass 417 (Working Holiday) visa. Employer superannuation contributions were made for you while you were the holder of a Subclass 417 (Working Holiday) visa. In 20XX, you commenced employment and an application was made for a Subclass 457 (Temporary Work Skilled) visa. In mid-20XX, your Subclass 457 (Temporary Work Skilled) visa was granted and you remained in Australia for the following X years. You advised you were never made aware that you had to change your super fund at that stage to not be taxed at 65% rate when departing Australia. In mid-20XX you called the ATO and was advised that you can move partial of your funds to another super fund and be taxed at the lower rate. You left what was the appropriate amount for the contributions made in Fund A and moved the appropriate amount for X years hard work into fund B to ensure you would only be taxed at the lower rate on fund B. Employer superannuation contributions were also made for you while you were the holder of a Subclass 457 (Temporary Work Skilled) visa. Prior to the expiration of your Subclass 457 (Temporary Work Skilled) visa, you left Australia permanently.
You intend to apply for a DASP
Income Tax Assessment Act 1997 subsection 301-175(1) Income Tax Assessment Act 1997 subsection 301-175(2) Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 subsection 5(1) Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 subsection 5(3) Income Tax Rates Act 1986 paragraph 3A(1)(a)
Summary The Commissioner cannot apportion the applicable tax in relation to a DASP where a DASP includes superannuation contributions made while you were the holder of a Subclass 417 (Working Holiday) visa and superannuation contributions made while you were the holder of a Subclass 457 (Temporary Work Skilled) visa. The taxable components of the DASP (excluding any tax free component), will be subject to an applicable tax rate of 65%. Detailed reasoning Subsection 301-175(1) of the ITAA 1997 provides that if you receive a superannuation benefit that is a DASP, the benefit is not assessable income and is not exempt income. However, a DASP is subject to a final withholding tax. Subsection 301-175(2) of the ITAA 1997 provides that you are liable to pay tax on the DASP at the rate declared by the Parliament in respect of DASPs. The tax is imposed in the Superannuation (Departing Australia Superannuation Payments Tax) Act 2007 (SDASPTA 2007) and the amount of the tax is set out in that Act. Subsection 5(1) of the SDASPTA 2007 states that the amount of tax is as follows: (a) for the tax free component of the departing Australia superannuation payment - nil;
(b) for the element taxed in the fund of the taxable component of the departing Australia superannuation payment - 35%; (c) for the element untaxed in the fund of the taxable component of the departing Australia superannuation payment - 45%. Relevantly in your case, subsection 5(3) of the SDASPTA 2007 provides that despite subsections (1) and (2), if a DASP: (a) is paid to a person on or after 1 July 2017; and (b) includes amounts attributable to superannuation contributions made while the person was a working holiday maker (within the meaning of the Income Tax Rates Act 1986 ); those subsections apply as if the percentage in paragraphs (1)(b) and (c) and (2)(a) were 65%. Under paragraph 3A(1)(a) of the Income Tax rates Act 1986, an individual is a working holiday maker at a particular time if the individual holds at that time a Subclass 417 (Working Holiday) visa.
In your case, as you were the holder of a Subclass 417 (Working Holiday) visa for a period of time, and superannuation contributions were made for you while you were the holder of that visa, the rate of tax that will apply to the entire DASP (excluding any tax free component) will be 65%. The rate of 65% applies to the taxable components, notwithstanding that superannuation contributions were also made for you while you were the holder of a different visa. There is no discretion available to the Commissioner to apportion DASP tax rates to take into account the fact that some contributions may have been made outside the working holiday maker visa period.