ATO ruling may affect offshore workers retirements
06/01/2016 – In the third quarter of 2015 the Australian Taxation Office (ATO) took into consideration whether work done at sea (e.g. off-shore oil rigs etc) is considered as ‘Work done outside of Australia’ for the purposes of if salary and wages associated with this work is to be included in Superannuation Guarantee rules.
The view express by the ATO is that work performed at sea more than 12 nautical miles from certain sea baseline Territories satisfies ‘word done outside of Australia’. This means that salary and wages earned from work undertaken outside of this range is not taken into account for the purpose of paying super guarantee contributions.
The term ‘Australia’ is outlined within the Superannuation Guarantee (Administration) Act (1992) and also the Income Tax Assessment Act (1997) which includes the term ‘coastal seas’ to be included in the geographical regions of Australia limited to 12 nautical miles from relevant baselines.
As a result of this view being expressed by the ATO this means that employers are not required to pay superannuation guarantee benefits to employees who undertake work at sea that satisfies the ‘word done outside of Australia’ definition.
This ruling may have significant effects on the retirement planning strategies for a number of Australians who work offshore on oil & gas rigs or with occupations like commercial fishermen etc.
If contributions are not being made regularly to their accounts they are relying strictly on the performance of the underlying investments in order to grow their retirement savings. In a strong ‘Bull Market’ this may prove to provide a satisfactory result however, as we have seen over history, these kinds of market conditions do not last.
On the opposite end of the scale, if the market is undergoing a pull-back or correction this can have a negative impact on their retirement savings. If we then consider fees, charges and insurance premiums that may also be getting deducted from the superannuation account this compounds the issue further.
This is a situation that Australian Expats may also be very familiar with too. As ATO rules currently stand if an Australian Employer sends an Australian Resident to work in another country on a temporary basis they must continue to pay superannuation guarantee contributions.
However once the employee becomes a non-resident for tax purposes the Australian based employer does not have to continue to make superannuation guarantee contributions (although some employers still do) and the ATO’s comments on this can be found here www.ato.gov.au/Business/Super-for-employers/Working-out-if-you-have-to-pay-super/
It is vital that those who find themselves earning salary or wages from work that meets the definition of ‘work done outside of Australia’ speak to their financial adviser to review their circumstances and undertake a retirement planning strategy appropriate to them.
The above article was written and posted on LinkedIn by Adam Bolton who is a financial adviser with Atlas Wealth Management, the first financial services firm in Australia to purely service Australian expats. With clients in over 18 countries Atlas Wealth Management is the specialist in providing financial advice to Australian expatriates. To read this and other posts on LinkedIn please follow this link www.linkedin.com/pulse/ato-ruling-may-affect-offshore-workers-retirements-adam-bolton?trk=hp-feed-article-title-share.
Disclaimer – the above commentary is general in nature and should not be construed as tax or financial advice. Please consult a licensed tax accountant and financial adviser to determine whether the above information is suitable for you