Saturday, August 09, 2008

Good News for Temporary Residents

On Friday the Australian government announced that they are backing down on their plan to grab temporary residents' superannuation contributions. Instead, if temporary residents leave Australia and do not claim their super within 6 months the money will be transferred to the government for safekeeping. This is much more sensible. People will still be able to claim their money back at a later data if they realize they "lost" it.

What's amazing is that Senator Sherry is quoted in the AFR today as saying that the rate at which departing people claim their super balances is "incredibly low". Financially non-aware people are just throwing away 9% or more of their salary.

2 comments: said...

This was probably part of the Labor's strategy for achieving their promise to reduce the very high number of "lost" super accounts. Personally, I think a many of the so-called "lost" super accounts relate to tax-dodging. There are way more tax file numbers on issue than there should be for the number of workers, businesses, trusts etc. When the TFN was first introduced it was relatively easy to get issued with more than one TFN using stolen IDs (often by getting a copy of a birth cert for a deceased person and then applying for a TFN). This neatly tied in with the many fake bank accounts people had created before the "100 point ID check" came into force for opening bank accounts. With both a bank account and a TFN created for a false identity it was easy for people to have a second job using the fake ID and make use of a second tax free threshold and low marginal tax rates on their second income stream. (Also meant the extra income didn't affect any welfare payments).

The SGL amounts for these such false IDs would never be "consolidated" once they quit the second job, as they wouldn't be able to consolidate the amounts into their "real" TFN ID.

I think the best way to eliminate a lot of low-level tax fraud would be to link the government benefit ID card (that I think is still being rolled out) to claimants existing TFN account. If the ID card had biometric data (eg. fingerprint) it would prevent more than one ID per person being created. After a couple of years the government could announce that all TFNs that weren't linked to an ID would be cancelled, and all financial transactions linked to those TFNs would be audited.

I doubt this will happen though. Australians have a long tradition of voting against IDs - especially any that are compulsory or that contain biometric data and therefore can't be easily gamed.

mOOm said...

They say the revised policy wll comply with their promise on "lost super". The previous policy was proposed under Costello and Labor were just going forward with it. But luckily they invited discussion before final implementation.

This tax dodging thing sounds a lot like the supposed illegal immigrants in the US with fake social security numbers paying social security taxes which of course they can't claim. I'm puzzled that the government doesn't realize that money is being paid into dead people's "accounts" or whatever is going on.

If they really wanted to deal with the temporary resident issue, I don't see why it couldn't be organized to pay out temporary residents super into their bank account when they leave a job unless they object - if they are planning to stay in Australia for example and want super to accumulate in the low tax environment. Problem solved.