Superannuation Tax When Leaving Australia (DASP) 2026: How Much Is Withheld — and What If You Never Claim?

AI says

The AI stated that superannuation balances left unclaimed and transferred to the ATO as unclaimed money attract a 65% withholding rate 'regardless of visa type.' In fact, the 65% rate for ATO-held unclaimed money applies specifically to working holiday makers; non-WHM temporary residents have their taxable component (taxed element) withheld at 35% and untaxed element at 45%, consistent with the standard DASP rates.

AI says

The Australian tax landscape for foreign residents, new migrants, and individuals departing Australia is subject to frequent changes and complexities, leading to significant confusion, particularly with new rules and proposals impacting 2026. Key areas of tax confusion for these groups include: ### For Foreign Residents and New Migrants 1. **Tax Residency Status:** This is consistently the most significant and confusing aspect. Many individuals mistakenly equate their visa or migration status with their tax residency status. * **New Rules from July 1, 2026:** Proposed "bright-line" residency tests are expected to come into effect from July 1, 2026, which will introduce tougher day-counting rules. Under these new rules, an individual will generally be an Australian resident if they are physically present in Australia for 183 days or more in any 12-month period. There's also a "45-day trap" where spending between 45 and 183 days in Australia could still result in tax residency if two or more "factor tests" (right to reside, accommodation, economic ties, family ties) are met. * **Implications:** Australian tax residents are taxed on their worldwide income, while non-residents are only taxed on Australian-sourced income. Temporary residents, holding specific temporary visas, are generally taxed only on Australian-sourced income and certain foreign employment income, with most foreign passive investment income being exempt. Getting residency status wrong can lead to incorrect tax rates, missed deductions, and penalties. 2. **Taxation of Foreign Income:** New migrants and foreign residents often struggle with declaring income earned outside Australia. Many assume that if income is taxed overseas, it's not taxable in Australia. * **Worldwide Income Rule:** Australian tax residents are generally taxed on their worldwide income, including overseas salaries, rent, dividends, pensions, business income, and capital gains. While the Australian tax system aims to prevent double taxation through the Foreign Income Tax Offset (FITO), this offset may not eliminate all mismatches between tax systems, and careful reporting and record-keeping are required. * **Temporary Residents:** Temporary residents generally only pay tax on Australian-sourced income, and certain foreign employment income earned while in Australia. Foreign investment income, such as rent and dividends from overseas, is usually exempt. 3. **Capital Gains Tax (CGT) for Foreign Residents:** There are significant proposed changes and ongoing complexities in this area. * **Broadening of Taxable Assets:** The Australian Treasury has released exposure draft legislation in April 2026 that proposes to significantly expand the scope of Australia's CGT regime for foreign residents. This includes clarifying and broadening the definition of "taxable Australian real property" (TARP) to include assets with a "close economic connection" to Australian land and amending the "principal asset test" for indirect interests. * **Retrospective Application:** Alarmingly, some aspects of these proposed changes could apply retrospectively from 2006, creating significant uncertainty and potential for reassessment of past transactions. * **Withholding Obligations:** Changes to the foreign resident CGT withholding regime prevent reliance on declarations that membership interests are not indirect Australian real property interests unless the ATO is notified for transactions valued at $50 million or more. The withholding rate for foreign resident capital gains also increased from 12.5% to 15% from January 1, 2025, and the A$750,000 market value threshold was removed. 4. **Medicare Levy:** New migrants often have confusion surrounding the Medicare levy, especially if they are ineligible for Medicare benefits. They may still be charged the levy until they take steps to obtain an exemption. 5. **Tax File Number (TFN) and Filing Obligations:** Basic administrative tasks like applying for a TFN, providing it to employers, and understanding the financial year (July 1 to June 30) and filing deadlines (October 31 for self-lodgers) can be confusing for new arrivals. Without a TFN, employers must withhold tax at the top marginal rate. ### For People Leaving Australia 1. **Change in Tax Residency:** Just like for new migrants, determining the exact date of ceasing Australian tax residency is critical and often misunderstood. Departing individuals may incorrectly assume their tax obligations automatically end upon leaving Australia. The new "bright-line" residency rules from July 1, 2026, will make this determination more prescriptive. 2. **Capital Gains Tax (CGT) on Departure ("Exit Tax"):** This is a significant "tax trap" for those leaving Australia permanently. * **CGT Event I1 (Deemed Disposal):** When an individual ceases to be an Australian tax resident, the ATO generally treats them as having disposed of their non-Taxable Australian Property (non-TAP) assets (like shares, managed funds, cryptocurrency, or overseas property) at their market value on the day residency ceases. This can trigger a capital gains tax liability even if the assets haven't been actually sold. * **Deferral Option:** Individuals can elect to defer the payment of this "exit tax" until the actual asset disposal. However, this comes with a cost: the loss of the 50% CGT discount for the period of non-residency, and the assets will be taxed at non-resident rates when eventually sold. * **Main Residence Exemption:** A significant change in recent years (after May 9, 2017) means that if you sell your former Australian home after ceasing Australian tax residency, you generally cannot claim the main residence exemption, leading to the full capital gain being taxable at non-resident rates with no 50% CGT discount. Selling *before* leaving is often advisable to retain this exemption. 3. **Superannuation (Departing Australia Superannuation Payment - DASP):** Accessing superannuation upon leaving Australia can be confusing, particularly regarding the withholding tax applied. * **DASP Tax Rates:** Temporary visa holders leaving permanently can claim their super through DASP, but this payment attracts significant withholding tax, typically 35% for most visas, and 65% for working holiday makers (Subclass 417 or 462 visas). If balances are left unclaimed and transferred to the ATO as unclaimed money, a 65% withholding rate applies regardless of visa type. * **New Tax on Large Balances (from July 1, 2026):** Proposed changes from July 1, 2026, will introduce an additional tax on earnings attributable to superannuation balances exceeding A$3 million. This impacts Australians living overseas who hold significant super balances. 4. **Tax-Free Threshold for Part-Year Residents:** Individuals leaving Australia and becoming non-residents for tax purposes will have a reduced tax-free threshold for the income year they depart, calculated proportionally to the months they were an Australian resident. 5. **Ongoing Australian-Sourced Income:** Even after becoming a foreign resident, individuals remain liable for Australian tax on any Australian-sourced income (e.g., rental income from Australian property, Australian dividends, or business income). Australian banks and share registries may apply non-resident withholding tax to interest and dividends. In summary, for all three groups, correctly determining tax residency is paramount, especially with the impending 2026 changes. New migrants face confusion around declaring worldwide income and understanding basic compliance. Foreign residents are significantly impacted by changes to CGT on Australian assets, some with retrospective effect. Individuals leaving Australia must navigate complex "exit tax" rules on capital gains and understand the tax implications of accessing their superannuation. The increasing data sharing between international tax authorities in 2026 further underscores the importance of accurate compliance for all internationally mobile individuals.