Summary
Australia does not operate a traditional contributory social security system. Rather, payments have to be made to approved individual Superannuation and Retirement Savings accounts, and a Medicare levy is imposed on those with income above a low threshold. Other benefits are payable to Australian citizens and permanent residents (after various periods of qualification) out of general taxation.
Details
Contributions
The Medicare levy is currently 2% of taxable income, and is payable by the individual. An additional surcharge of between 1% and 1.5% is payable by high income taxpayers where the taxpayer is not covered by an Australian-registered health insurance fund which provides hospital cover. Superannuation contributions are 12% and are paid by the employer only. The maximum Superannuation contribution base is $62, 500 per quarter.
Treaties
Australia has more than 20 social security treaties, primarily with European countries, but also with Canada, the US, India, Japan and Korea. There is no contribution agreement with the UK.
Treaties only generally provide exemption from Australian Superannuation contributions. Inbound expatriates who are exempt from Superannuation contributions by virtue of a certificate of coverage are still generally liable to pay the Medicare levy (and surcharge, if applicable).
Exemptions
Employers are not required to make Superannuation contributions for Australian employees paid by non-resident employers for work done outside Australia (ie localisation for outbound Australians). This can be advantageous for Australians moving to low social tax locations.
Foreign senior executives who hold certain visas or entry permits can be exempted from Superannuation contributions.
Administration
Medicare Levy payments are withheld from employees’ salaries through the Pay As You Go (PAYG) system. Superannuation Guarantee payments should be made by employers at least quarterly (28 days after the end of the quarter), but from July 2026 employers will have to pay over Superannuation contributions within 7 days of the payment of salary and wages.
Benefits
Superannuation benefits can be drawn once individuals reach the age of 60. On reaching 65, or ceasing employment after the age of 60, individuals have total access to their accumulated superannuation benefits. The state provided ‘Age’ pension is means tested and unlikely to be payable to expatriates.
Other
If an employee has a salary sacrifice arrangement through which their employer pays directly into Superannuation, they will enhance their retirement benefits and will have a lower tax base. The combined total of salary sacrificed contributions must be less than A$30,000 per year.
The Medicare Levy is not payable by individuals who are tax resident outside Australia
Social security insights are intended to provide quick and straightforward insights into social security regimes. Always seek professional advice based on actual circumstances before acting.
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