Australia – Social Security Agreement with India Comes into Force

Australia – Social Security Agreement with India Comes

This GMS Flash Alert reports on the bilateral Social Security Agreement between Australia and India which took effect from 1 January 2016.

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The bilateral Social Security Agreement (SSA) between Australia and India is in effect from 1 January 2016.1  Under this SSA, signed by the two countries in November 2014, double coverage of pension contributions for seconded employees between Australia and India may be preventable.  

Australia presently has 30 international social security agreements with other countries, with several more under negotiation.  The Australia-India SSA is broadly similar to the SSAs which Australia has signed with other countries. This SSA applies to the Australian superannuation guarantee law requiring employers to make superannuation guarantee contributions for their employees.  In relation to Indian law, this agreement applies to the relevant Indian social security and pension laws.2

WHY THIS MATTERS

The execution of the SSA between Australia and India is a welcome step which provides an opportunity for organisations to potentially eliminate duplicative costs as a result of double pension contributions for employees on international assignments who are covered under mandatory pension regimes in both Australia and India.  In addition, the execution of the SSA between Australia and India provides social security protection for international assignees, such that they do not lose their social security benefits entitlement in their home country when they go to work in the other country.

Further, the possible exemption of superannuation contributions for an assignee from India to Australia, eliminates the need for departing Australia superannuation payment (DASP) to be claimed when the assignee departs Australia at the end of the assignment.  This should simplify the administration of assignments from India to Australia.

Key Benefit under the SSA for International Assignees and Their Employers

Under the SSA, employees seconded by their employers in one country to work in the other country on temporary assignments, but who remain covered by their home country’s superannuation/pension legislation, should be exempt from superannuation/pension contribution legislation in the host country.  This exemption from superannuation/pension contribution in the host country is available when the employee obtains a Certificate of Coverage (CoC) from the relevant authority in the home country. 

KPMG NOTE

For example, the employer of an Australian employee sent to work in India on a temporary assignment can continue to make superannuation guarantee contributions in Australia and be exempt from making pension contributions in India for this employee.  Similarly, the employer of an Indian employee sent to work temporarily in Australia, can continue to make pension contributions in India and there will be no requirement to make superannuation guarantee contributions in Australia on behalf of that employee, provided that a CoC is in place. 

In addition, this exemption under the SSA also applies if the employee is first seconded to a third country and is subsequently seconded to Australia or India.  To be clear, the exemption will only apply for the period the assignee is working in Australia or India.  

Period of Coverage for a CoC

Under certain conditions, a CoC, generally valid for a period of up to five years, can be obtained by employees on assignment between the two countries.  If coverage is required for a period longer than five years, an extension of the CoC can be requested in writing and is subject to the approval of the relevant competent authorities.  The written request should include the reasons why the seconded employment will exceed the five-year period.  

Other Benefits under the SSA

Totalization of Contribution Periods

The period of service rendered by an employee in both countries will be added together for the purpose of determining his or her eligibility requirements for the relevant pension benefits (e.g., Australian age pension, Indian old-age pension, survivors’ pension, and Permanent Total Disability pension), subject to certain conditions.

Export of Benefits

The benefits acquired under the legislation of one country will be exportable to the other country.

KPMG NOTE

Steps to Consider Regarding Existing Australia-India Assignees and Future Ones

Companies should review their existing assignee population to determine whether they can avoid double pension contributions for their seconded employees between Australia and India by applying for a Certificate of Coverage.  Companies should consider existing assignment policies, processes, and immigration obligations when applying for a CoC for those employees currently on assignment.  We also recommend companies consider their contractual employment obligations prior to ceasing pension contributions for any existing assignments.

For future secondment arrangements between Australia and India, companies should review their existing assignment policies and processes so that double pension contributions across Australia and India are prevented, where appropriate.  

FOOTNOTES

1  For the “in force” announcement, the text of the agreement (in Hindi and English) and an “Information Sheet,” see the Web page of Australia’s Department of Social Services at:

https://www.dss.gov.au/about-the-department/international

2  As regards India, the Agreement applies to the Employees’ Provident Funds Scheme, 1952; Employees’ Pension Scheme, 1995; and Employees’ Deposit-Linked Insurance Scheme, 1976.    

CONTACTS

New South Wales and Australian Capital Territory 

Andy Hutt (Tax)

Tel. +61 2 9335 8655

ahutt@kpmg.com.au

 

Michael Wall (Immigration)

Tel. +61 2 9335 8625

mwall2@kpmg.com.au

____________________________________________________________

Victoria, South Australia, and Tasmania

Ben Travers (Tax)

Tel. +61 3 9288 5279

btravers1@kpmg.com.au

 

Jacqui Tucker (Tax)   

Tel. +61 8 8236 3378  

jtucker@kpmg.com.au   

 

John Unger (Immigration) 

Tel. +61 3 9288 5725

junger@kpmg.com.au 

____________________________________________________________

Western Australia 

Ivan Hoe (Immigration)

Tel. +61 8 9263 7181

ihoe@kpmg.com  

 

Dan Hodgson (Tax)

Tel. +61 8 9278 2053

dghodgson@kpmg.com.au

____________________________________________________________

Queensland and Northern Territory 

Hayley Lock (Tax)

Tel. +61 7 3434 9176

hlock@kpmg.com.au   

 

Philip Duncan (Immigration)

Tel. +61 7 3434 9196

pduncan1@kpmg.com.au

The information contained in this newsletter was submitted by the KPMG International member firm in Australia.

© 2016 KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

Flash Alert is an Global Mobility Services publication of KPMG LLPs Washington National Tax practice. The KPMG logo and name are trademarks of KPMG International. KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever. The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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