Summary

Australia does not operate a contributory social security system as such. Rather, payments have to be made to approved 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 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 currently 10.5%, increasing to 12% in 2025 and are paid by the employer only.

Treaties

Australia has more than 30 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.

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 supplements their employers’ Superannuation contributions through salary sacrifice to enhance their retirement benefits, the salary sacrifice arrangement is largely tax beneficial (it lowers their tax base). The combined total of employer and salary sacrificed contributions must be no more than A$27,500 per year.

The Medicare Levy is not payable by individuals who are tax resident outside Australia

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