The Australian Institute of Superannuation Trustees (AIST) has labelled the Government's proposed changes for temporary residents as discriminatory.

The new rules would introduce a two-tier system of super entitlements for Australian and temporary overseas workers and appears to be at odds with the Rudd Government's commitment to a more humanitarian approach to immigration issues, according to AIST chief executive Fiona Reynolds.

AIST believes the measure will cost overseas workers nearly $1 billion in super.

Under the Government's changes, superannuation balances of temporary residents will be diverted to the Australian Taxation Office. The balances would attract no interest.

If the balances are not claimed within five years of leaving Australia, temporary residents forfeit all their superannuation savings.

"The measure is not inconsistent with the way Australians who work overseas are treated on their permanent return to Australia, where in many cases they can't access compulsory social security or employer pension contributions made in that overseas country,'' Minister for Superannuation and Corporate Law Nick Sherry said when he announced the Government proposal.

Reynolds said temporary residents, many of whom stayed up to five to seven years and came from developing countries, would be hit hard by the loss of earnings on their super, even if they claimed their super entitlement upon leaving the country.

"At a time when Australia has skilled shortages we need to be looking at ways to attract more skilled migrants, not discourage or stigmatise them," Reynolds said.