As part of the Working Holiday Maker Reform package there has been a change in the departing Australia superannuation payment (DASP) tax rate for working holiday makers (WHMs).
From 1 July 2017, super funds will be required to apply a new tax rate of 65% to the taxed and untaxed elements of the taxable component of a DASP which contains amounts attributable to super contributions made while the person was a WHM (referred to as the WHM tax rate). The tax-free component continues to be taxed at 0%.
Find out about:
- When should the new WHM tax rate of 65% be applied to a DASP?
- Can a former temporary resident have one member account with a fund having held a number of different visas?
- What tax rate should be applied to the DASP if the applicant has never held a WHM visa?
- What tax rate should be applied to the DASP if the applicant has held a WHM visa?
- What if a DASP includes, but is not wholly comprised of, amounts attributable to super contributions made while the person held a WHM visa?
- If the fund has not applied the correct tax rate, and the ATO holds information to suggest this is the case, how will the ATO react?
- What changes can funds expect to see in the DASP online application?
- Is the paper application being updated?
- Will clients using the paper application need to obtain a Home Affairs certificate, even if the application is for an amount of less than $5,000?
- Is it possible to remove the paper application?
- If overtaxed, a client would most likely go to the fund rather than the ATO, how should funds action these requests?
- Is providing the additional visa information compulsory?
- If an applicant has three accounts in a fund, will the fund pay one DASP to the applicant or one from each account, and how will the payments be taxed?
- As ATO shares information from Home Affairs, can there be some built-in portal for the funds to do the same with Home Affairs.
When should the new WHM tax rate of 65% be applied to a DASP?
The new WHM tax rate is applied to the taxed and untaxed elements of the taxable component of a DASP paid to a person on or after 1 July 2017. This applies if the DASP includes amounts attributable to super contributions made while the person was a WHM.
If a DASP does not include such amounts, the DASP ordinary tax rates apply. For payments made on or after 1 July 2017, these are 35% for the taxed element of the taxable component and 45% for the untaxed element.
Can a former temporary resident have one member account with a fund having held a number of different visas?
Yes, a former temporary resident (FTR) who is being paid a DASP from a fund may have one member account with a fund but have held more than one type of visa. It is therefore possible that some of the super contributions were made to that account while the person was a WHM, and some contributions were not.
What tax rate should be applied to the DASP if the applicant has never held a WHM visa?
If the applicant has never held a WHM visa, the tax rate to be applied from 1 July 2017 will be:
- 35% for the taxed element
- 45% for the untaxed element of the taxable component of the DASP.
What tax rate should be applied to the DASP if the applicant has held a WHM visa?
If the applicant has held a WHM visa, super funds will need to check whether the DASP include amounts attributable to super contributions made under the WHM visa. If there were, apply the DASP WHM tax rate of 65% to the taxed and untaxed elements. If there were not, apply the DASP ordinary tax rates to the taxed and untaxed elements.
In cases where super funds are not able to determine whether the DASP includes amounts attributable to super contributions made under the WHM visa, for example rollovers, the fund can:
- apply the DASP WHM tax rate where the applicant has held WHM visa and no other visas with work rights
- apply the DASP ordinary tax rates where the applicant has held WHM visa and other visas with work rights.
What if a DASP includes, but is not wholly comprised of, amounts attributable to super contributions made while the person held a WHM visa?
The law does not allow for apportionment. If the payment includes amounts attributable to super contributions made while the person held a WHM visa, the 65% tax rate applies to the taxed and untaxed elements of the taxable component of the DASP. This is the case if the DASP is not wholly comprised of amounts attributable to those contributions.
If the fund has not applied the correct tax rate, and the ATO holds information to suggest this is the case, how will the ATO react?
If the fund has made a reasonable assessment of the correct tax rate to apply, and withheld an amount from a DASP, based on information they held at the time they processed the payment, there will generally be no action from us.
However, if we conduct a review of fund obligations and find information the fund holds which indicates the higher rate of 65% should have been used, the fund will be required to adjust their withholding calculation as they currently do.
What changes can funds expect to see in the DASP online application?
The DASP online application system will be updated on 9 December 2017 to obtain visa information from the Department of Home Affairs (Home Affairs) where the applicant has held a WHM visa.
On each DASP application, you will see one of the messages listed below:
- The Home Affairs records show that the applicant has never held a Working Holiday Maker (WHM) visa.
- The Home Affairs records show that the applicant held the following Working Holiday Maker (WHM) visas and no other visas with working rights during their time in Australia.
- The Home Affairs records show that the applicant held the following Working Holiday Maker (WHM) visas along with other visas with working rights during their time in Australia.
Details of the WHM visa details will be shown in the DASP application for funds to view.
Is the paper application being updated?
Yes. The paper application has been updated to allow applicants to provide visa information if they have held a WHM visa. Super funds can check their contribution details against the visa details provided by the WHM.
Applicants do not need to provide visa information on the paper application if they have applied for Certification of Immigration Status from Home Affairs as the certificate will include WHM visa information.
Will clients using the paper application need to obtain a Home Affairs certificate, even if the application is for an amount of less than $5,000?
Under the current law, only withdrawal benefits of $5,000 or more require a Home Affairs Certificate of Immigration Status. A law change is required to remove the option for applicants to provide visa and immigration evidence to the fund directly for benefits of less than $5,000.
If the applicant’s withdrawal benefit is less than $5,000, they have the option to either provide evidence of their visa and immigration status or obtain the Home Affairs certificate.
If the applicant chooses to obtain the certificate, they do not need to provide visa information. If they don't obtain a certificate, they will need to provide visa information on their paper application.
Funds may have additional obligations under their trust deed.
Is it possible to remove the paper application?
Paper applications have always been made available as an alternative option for applicants who may not have access to online system.
If overtaxed, a client would most likely go to the fund rather than the ATO, how should funds action these requests?
If the DASP is paid by a fund no formal ‘review rights’ exist under the income tax law if the recipient is dissatisfied with the tax rate(s) that have been applied to their payment or a decision made by the fund in applying the WHM tax rate.
However, if a fund has made an error with the withholding amount, the recipient may request a refund of the amount withheld in error under section 18-65 of Subdivision 18 B of Schedule 1 to the TAA, or the Commissioner of Taxation under section 18-70 (depending on the timing of the request).
If the fund becomes aware of the error or the recipient of the DASP applies to the fund for a refund before the end of the financial year in which the amount of tax is withheld from the DASP by the fund, the request must be actioned by the fund. After this time, the recipient can apply to the ATO for a refund.
Is providing the additional visa information compulsory?
If the applicant held a WHM visa, applied via paper and did not obtain a Certification of Immigration Status from Home Affairs, they will need to provide visa information in the paper application.
Visa information is required for applicants who have held a WHM visa so funds can determine the appropriate DASP tax rates to apply to the payment.
If an applicant has three accounts in a fund, will the fund pay one DASP to the applicant or one from each account, and how will the payments be taxed?
This depends on how the fund usually makes DASP payments. If your fund normally makes one payment then the taxed and untaxed elements of that payment will be taxed at 65%. If your fund pays a DASP from each account then only the payment from the account containing amounts attributable to super contributions made while the applicant was a WHM will be taxed at 65%.
As ATO shares information from Home Affairs, can there be some built-in portal for the funds to do the same with Home Affairs
ATO confirmed that due to privacy policy principles, funds cannot access information from Home Affairs.
Frequently asked questions on changes to taxation of the departing Australia superannuation payment (DASP) for working holiday makers.