When living overseas you are still entitled to make a contribution to an Australian Superannuation Fund if you wish and it can be claimed as a tax deduction.
There are however, some important considerations that need to be considered.
Firstly, any contribution made can only be claimed as a deduction to a maximum that will take your taxable income to nil. For example, if your taxable income (from property rental or other taxable items) is A$3,000, even of you contribute A$10,000 to your Superannuation fund, then you can only claim A$3,000 as a deduction to take your income to nil.
This is important to remember as you will need to notify your Superannuation fund manager to ensure that they deduct the correct amount of contributions tax and record the balance as a personal contribution. If you don’t do this you may end up loosing 15% of your contribution uncessarily.
The maximum annual deduction is now A$25,000 for those under 50 years old and A$50,000 for those over 50. It is also important to make your contribution well before the year end of 30th June as the funds must clear to be assured of a tax deduction.
If you have no other taxable income or indeed have a tax loss, then a Superannuation contribution will create no tax benefit as it can not increase a loss any further.
As such, it is usually better to not make a contribution in these cases unless you have the sole intention of increasing your saving pool for retirement.
In most cases, your cash is better invested in your personal name as there is no tax on dividends or capital gains on share investments in Australia for persons living out of Australia, whereas your Superannuation fund may be taxed when it invests the contributed funds.
Furthermore, if you are still facing a sizeable mortgage on your intended residence on return to Australia, then you would be better advised to keep the funds out of the Superannuation fund so they can be used to reduce the debt on your home, then make additional contributions later in your life from the cash flow savings of having a low or no zero private mortgage.
Superannuation is an important part of retirement in Australia, and comes with some special tax incentives, but it needs to be balanced with your overall objectives.
You should not be overly concerned if you are not contributing to a Superannuation fund while overseas as long as you can see some increase in your overall financial circumstances.
The important aspect is to ensure you are indeed building an increasing savings base that can be used to financially advance your personal situation on return to Australia.
Once you know you have sufficient funds built up to ensure a debt free residence, then you may wish to make consider the merit of voluntary contributions into your Superannuation fund if that suits your situation.
