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SCMP Reporter

OVERSEAS workers in Australia will no longer be able to withdraw contributions to the national superannuation scheme when they leave the country permanently.

 New laws took effect on July 1 preventing expatriates from withdrawing contributions made by them and their employers upon departing Australia. Instead, they will have to wait until they reach the preservation age, 55.

 Doug Farch, senior tax manager in the Melbourne office of accountant Ernst & Young, said individuals wanting to withdraw money from the fund would have to provide their scheme managers with proof of retirement.

 Whether they then received a lump sum or a pension would depend on the scheme's provisions.

 The federal government did agree to a transitional scheme, allowing individuals who leave soon after the June 30 cut-off date to notify their scheme managers in advance and take their contributions with them.

 Mr Farch said the Government had failed to publicise the scheme widely. 'A lot of people would not have known about it,' he said.

 The new rule is the latest of a series of controversial changes made to Australia's superannuation scheme.

  In other regulations that took effect in August, individuals given golden handshakes by their employers could face considerable financial penalties if they roll the money over into a superannuation fund.

 The change turns on its head a basic rule of financial planning that the long-term tax advantages of roll-overs are so significant that cash payments rarely make sense.

 'Generally speaking, it would be better to take it in cash now,' Mr Farch said.

 A surcharge of up to 15 per cent applies to golden handshakes whether they are cashed in or rolled over. But when they are cashed, the charge applies only to the portion of the payout 'earned' since August 20, 1996.

 When the handshake is rolled over into a superannuation scheme - something commonly done in Australia - the surcharge applies to the amount 'earned' since June 30, 1983.

 The surcharge will not affect individuals earning less than A$70,000 (about HK$387,800) annually and will increase to a maximum of 15 per cent on individuals earning more than $85,000 a year.

 It is the pension fund rather than the individual that pays the surcharge, although the fund can deduct an element from payments made to a member to meet the cost. Mr Farch said the change would remove much of the incentive for individuals to contribute to the superannuation scheme as a salary benefit.

 Australia's maximum personal tax rate is 48.5 per cent, little different from the 15 per cent surcharge plus the 30 per cent tax one would pay on the golden handshake.

 'The advantage has been substantially reduced,' Mr Farch said. 'People could think the advantage is so slight that it would make sense to look at other forms of investment.'  After 2001, however, most cashed-in golden handshakes will be 100 per cent surchargeable. Mr Farch said he had no idea why the Government had chosen to differentiate between cash and rollovers, especially as in earlier statements, ministers and officials had said the two would be treated the same.



Rule moves hit Australia payouts