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CPA Australia

Superannuation Guide: 2010 – 2011

This guide is an initiative of the CPA Australia Retirement Savings Centre of Excellence. Information is current – based on legislation as at 1 July 2010.

Maximum tax rate*

Contribution rules Contribution

Cap

Excess contributions tax*

Concessional contribution (age 50 and over)

$25,000^ p.a. $50,000^^ p.a.

30%**

Non-concessional contribution (NCC)

$150,000^^^ p.a. or 3 year limit of $450,000

45%

^ Indexed to AWOTE, will only increase in $5,000 increments ^^ Transitional cap until financial year 2011/12. From 1 July 2012 the $50,000 cap will continue to be available to individuals over 50 whose superannuation balance is under $500,000. ^^^ Cap equal to six times the concessional contributions cap. NCC can only be accepted by the super fund if member’s TFN has been quoted to the fund. * Plus Medicare Levy (1.5%) ** In addition to 15% tax on contributions. Excess concessional contributions also count towards the NCC cap. Note: Contributions made by employers or the self-employed are fully tax deductible up to age 75.

Taxation of Superannuation benefits – lump sums Thresholds^^ Tax free component Taxable component – taxed element^ Age 60 & over Preservation age to 59 Under preservation age Taxable component – untaxed element Age 60 & over Preservation age to 59

Under preservation age

Taxation of Superannuation benefits – income streams

Tax rate* 0%**

$0 - $160,000^ Over $160,000

0%** 0% 15% 20%

$0-$1,155,000 Over $1,155,000 $0 - $160,000 $160,000-1,155,000 Over $1,155,000 $0-$1,155,000 Over $1,155,000

15%** 45% 15% 30% 45% 30% 45%

* Plus Medicare Levy (1.5%) ** Where benefits have been subject to tax in the fund, amounts are not assessable and are tax free. ^ If benefit paid has taxable component with both a taxed and untaxed element, the low rate cap applies to the taxed element first. ^^ Indexed to AWOTE, will only increase in $5,000 increments

Tax free component

0%**

Taxable component – taxed element^ Age 60 & over Preservation age to 59 Under preservation age

0%** Marginal rate with 15% tax offset Marginal rate

Taxable component – untaxed element^ Age 60 & over Age 59 and under

Marginal rate with 10% tax offset Marginal rate

* Plus Medicare Levy (1.5%) ** Where benefits have been subject to tax in the fund, amounts are not assessable and are tax free. ^ If benefit paid has taxable component with both a taxed and untaxed element, the low rate cap applies to the taxed element first.

Superannuation guarantee charge – minimum rate 1997/1998

6%

2000/2001

8%

1998/1999

7%

2001/2002

8%

1999/2000

7%

2002/2003 onwards

9%

Maximum Contribution Base $42,220 per quarter (2010/11). No SG payable if earnings <$450 in a month.

Superannuation guarantee charge – quarterly due dates Quarter ending

Employer contribution due

SGC statement and payment due

30 September

28 October

28 November

31 December

28 January

28 February

31 March

28 April

28 May

30 June

28 July

28 August

Penalties apply to those employers who fail to submit SG contributions by the 28th of the month following the end of quarter. They are required to complete an SG statement by the 28th of the second month after the end of quarter and pay the SG charge liability. This charge consists of: the shortfall in the SG contributions for the quarter, interest at 10% per annum on the shortfall up to the date the statement and payment is submitted and a $20 administration charge for each employee where a shortfall exists. From 1 January 2006, contributions made after the due date maybe used to offset the SG shortfall.

Superannuation surcharge rate (abolished effective 1/7/05) Surcharge Rate % =

Taxpayers ATI* – $99,710

$1,709

*ATI = Adjusted Taxable Income A maximum surcharge rate of 12.5% applied if ATI exceeded $121,075


CPA Australia

Superannuation Guide: 2010 – 2011

Superannuation government co-contribution Assessable income (AI)$ Maximum govt. co-contribution* $ 0 – 31,920 1000 31,921 – 61,920 1000 – [(AI-31,920) x 0.05] 61,921 + Nil * If amount payable <$20, minimum payment = $20 Government co-contribution available for personal contributions made by an employee or a self-employed individual to a complying super fund or RSA. Must earn 10% or more of total income from carrying on a business, eligible employment or a combination of both calculated by assessable income (including any reportable FBT) less deductions entitled for carrying on a business (excluding work-related employee deductions or deductions for personal contributions). Tax return must be lodged and payment will then be calculated by the ATO and paid directly to individual’s fund.

Superannuation contributions – spouse offset Spouse Assessable Income Maximum Rebatable Maximum rebate $ (SAI) $ Contributions (MRC) $ 0 – 10,800 3,000 540* 10,801 – 13,799 3,000 – [SAI – 10,800] MRC x 18% 13,800 + Nil Nil *Where the actual contribution is less than these figures, the maximum rebate will be the actual contribution x 18%. Spouse rebate is available for contributions made on behalf of their spouse by the contributor (whether an employee or not) where they and their spouse are residents at the time of contribution. Contributions must be to a complying superannuation fund or an RSA to be rebatable.

Preservation ages* Individual born Preservation age Before 1/7/60 55 1/7/60 – 30/6/61 56 1/7/61 – 30/6/62 57 1/7/62 – 30/6/63 58 1/7/63 – 30/6/64 59 After 30/6/64 60 *All superannuation contributions and earnings from 1 July 1999 are preserved.

Death benefit superannuation payments Lump sums – paid to a dependant Lump sums – Paid to non-dependant Tax free component Taxable component – Taxed element – Untaxed element Pension – deceased/primary beneficiary over 60 Pension – Primary beneficiary under 60 Tax free component Taxable component – Included in assessable income

*Plus Medicare Levy (1.5%) **Not assessable

Maximum tax rate* 0%** 0%** 15% 30% 0%** 0%** Marginal rate Pension rebate of 15% for individuals between preservation age and 60

Minimum income stream percentage factors Age at start of pension & each 1 July Under 65 65-74 75-79 80-84 85-89 90-94 95 or more

Percentage factor 4% 5% 6% 7% 9% 11% 14%

Minimum payment amount for account-based pensions reduced by 50% for 2010/11.

Minimum income stream standards Account based income stream payments Minimum payment Maximum payment

Account Percentage Balance X Factor No limit*

Must make minimum payment at least annually. No payment required in first year if pension commenced between 1 June and 30 June. *Maximum 10% p.a. for ‘transition to retirement’ pensions Non-account based income streams (from 20/9/07) Purchase Price Percentage Minimum payment^ Income Stream X Factor Must be paid annually. ^ Minimum payment must ensure withdrawal value is equal to no more than 100% of the purchase price of the pension OR be a lifetime pension and have no residual capital and the first year pension equal to or more than the purchase price of the pension multiplied by respective percentage factor. Existing income streams are deemed to satisfy the minimum income stream requirements.

No tax file number (TFN) tax Maximum tax rate* For accounts established before 1 July 2007 Assessable contributions of $1,000 or less Assessable contributions greater than $1,000

Nil 30%**

For accounts established after 1 July 2007 Assessable contributions

30%**

TFN provided within four years Superannuation Fund or RSA Superannuation benefits Taxable component

Tax offset (equal to no TFN tax) 45%

*Plus Medicare Levy (1.5%) **Payable in addition to 15% contributions tax Note: Non concessional contributions cannot be accepted unless a valid TFN has been provided.


CPA Australia

Superannuation Guide: 2010 – 2011

Employment termination payments

Transitional period 1 July 2007 – 30 June 2012

Life benefit employment termination payments Thresholds Tax free component

Life benefit employment termination payments Maximum Tax Rate* 0%**

Taxable component Pre-preservation age

$0 - $160,000^ Balance $0 - $160,000^ Balance

Preservation age or over

30% 45% 15% 45%

Dependant Tax free component Taxable component Non-dependant Tax free component Taxable component

Transitional termination payment (lump sum) Thresholds Tax free component Taxable component Pre-preservation age

Age is determined at the end of the financial year in which the termination payment is received. Death benefit employment termination payments Thresholds

Life benefit termination payment can be rolled over to a super fund or received as a cash lump sum provided the amount of payment has been specified in the employment contract at 9 May 2006 and paid before 1 July 2012.

Preservation age or over Maximum tax rate*

$0 - $160,000^ Balance

0%** 0% 45%

$0 - $160,000^ Balance

0%** 30% 45%

*Plus Medicare Levy (1.5%) **Not assessable ^Indexed to AWOTE, will only increase in $5,000 increments. Applies regardless of whether deceased would have qualified for the transitional arrangements between 1 July 2007 and 30 June 2012.

$0 - $1,000,000 Balance $0 - $160,000^ $160,000^ - $1,000,000 Balance

Maximum tax rate* 0%** 30% 45% 15% 30% 45%

Directed termination payment (rollovers) Maximum tax rate* Taxable component Taxable amount above $1,000,000 count towards the concessional contributions cap

15%

Age is determined at the end of the financial year in which the termination payment is received. *Plus Medicare Levy (1.5%) **Not assessable ^Indexed to AWOTE, will only increase in $5,000 increments.

Other termination payments Non ETP lump sum payment

Unused Long Service Leave

Accrued Annual Leave

Period of accrual

Assessable amount

Maximum tax rate*

Pre 16/8/78

5%

Marginal rate

16/5/78 17/8/93

100%

30%

Post 17/8/93

100%

Marginal rate

Pre 18/8/93

100%

30%

Post 17/8/93

100%

Marginal rate

Bona fide redundancy, invalidity or approved early retirement scheme payments

Unused Long Service Leave Accrued Annual Leave

Period of accrual

Assessable amount

Maximum tax rate*

Pre 16/8/78

5%

Marginal rate

Post 15/8/78

100%

30%

Full Period

100%

30%

Bona Fide Redundancy Tax-free Amount: $8,126 + $4,064 for each completed year of service (2010/2011).

CPA155214 06/2010

*Tax rates exclude Medicare Levy which needs to be added to the applicable rate (unless rate is 0%)

Copyright © CPA Australia Ltd, 2010 Disclaimer: CPA Australia Ltd has used reasonable care and skill in compiling the content of this material. However, CPA Australia Ltd makes no warranty as to the accuracy or completeness of any information in these materials.These materials are not intended to be advice, whether legal or professional. All names, figures, solutions and scenarios are fictitious and have been established for training purposes only. You should not act solely on the basis of the information contained in these materials as parts may be generalised and the application of exercises, examples and case studies may vary from organisation to organisation and may apply differently to different people and circumstances. Further, as laws change frequently, all practitioners, readers, viewers and users are advised to undertake their own research or to seek professional advice to keep abreast of any reforms and developments in the law.


Superannuation Guide 2010-2011