An Australian union is calling on the Albanese government to stop taxing the superannuation of Pacific and Timor-Leste workers that come to Australia to pick fruit and work in nursing homes.

There are more than 30,000 workers currently employed on the Pacific Australia Labor Mobility (PALM) scheme, working in farming, meat processing and the care sector across the country.

The Australian Workers’ Union says the workers are losing out on their superannuation entitlements with more than a third of earnings taxed when the super is withdrawn.

“The PALM scheme is not just about sourcing labour, it’s meant to engender good relations with our Pacific neighbours, it’s pretty tough to see how seizing 35 per cent of workers’ superannuation is sending the right message,” AWU national secretary Paul Farrow said.

“I think it’s a very bad look for Australia, especially considering what has happened in this nation’s history, to be unreasonably seizing the hard-earned wages of Pacific workers,” he said.

The AWU says a complex administrative system is also prohibiting workers from accessing their entitlements.

It is now calling for an urgent end to the tax for PALM workers withdrawing their superannuation once they leave Australia.

Super withdrawn from foreign workers is taxed

Superannuation earned in Australia can be withdrawn by foreign workers overseas after their visa expires and is currently taxed at 35–45 per cent.

It must be paid into an Australian bank account or via an Australian cheque.

On average, a worker on a nine-month PALM placement earns $3,800 in super.

But Mr Farrow said a lack of comparable superannuation schemes in the Pacific, complex paperwork and requirements to have an Australian bank account made accessing the entitlements problematic for the workers.

“If you look at the Australian Tax Office figures of how much unclaimed super there is in this industry, it doesn’t take you long to start working out that 36,000 workers on average, you know, $3,800 over a nine-month period, that’s $136 million,” he said.

“It’s no wonder that there’s a lot of unclaimed super in this space, I would say that the vast majority of people give up and just move on.”

Describing the PALM as a form of foreign aid designed to strengthen Australia’s relationship with its neighbours, Mr Farrow said the 35 per cent tax rate was a “stupid own-goal” by the federal government.

“If this money doesn’t go with them [workers] and it ends up in the ATO, that’s a complete waste of time,” he said.

A spokesperson for Financial Services Minister Stephen Jones said super was designed to help people save for their retirement in Australia.

“Temporary residents leaving Australia seeking access to their superannuation benefits as a Departing Australian Superannuation Payment (DASP) are required to pay an additional tax to recover the tax concessions as they will not be retiring in Australia,” they said.

“The government will continue to assess the PALM scheme to ensure it is working as intended.”

Manu Jones is from Vanuatu and has recently been employed on a South Australian farm, under the PALM scheme.

In comments provided by the AWU, Mr Jones said issues with super have created a bad feeling among Ni-Van workers.

“People work so hard for every dollar they earn picking fruit, it’s heartbreaking to have to hand so much back again,” he said.

“I know the labour department in Vanuatu operate a service for workers on Wednesdays in Port Villa, but they can only offer 10 spots per week for some 6,000 workers in the country.

“The labour department are trying their best to assist workers with their super, however, this is an uphill climb that makes it a lengthy and frustrating process for workers especially if they don’t reside in Port Vila.”

The union is speaking out as the Commonwealth Heads of Government gather in Samoa — a country that has almost 3,000 workers in Australia on the PALM scheme.

The ATO holds more than $1 billion in unclaimed superannuation owed to former temporary residents, including PALM workers.