AUSTRALIA SUMMARY. Social Security. Prepared by Hannover Life Re of Australasia.

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1 Prepared by Hannover Life Re of Australasia. I SUMMARY Social Security Eligibility Retirement Age Contributions Retirement To qualify as an Australian resident a person must be living in Australia as: An Australian citizen, or The holder of a permanent resident visa, or A New Zealand citizen who was in Australia on February 26, 2001, or for 12 months in the 2 years immediately before that date, or was assessed as protected before February 26, The qualifying age for the Australian Age Pension is 65 years. As of July 1, 2017, the qualifying age for Age Pension will increase from 65 to 65.5 years. The qualifying age for Age Pension will then rise by 6 months every 2 years, reaching 67 by July 1, The Age Pension is paid from government revenue / taxes. To qualify for Age Pension, the age and residence requirements must be satisfied. Age Pension depends on income, assets and other circumstances. Flat rates. Means-tested depending on income and assets. These Age Pension payment rates are effective from September 20, 2014: For single persons the maximum payment is AUD per fortnight. For couples the maximum payment is AUD per person per fortnight. These amounts exclude the Pension Supplement amount which is currently a maximum of AUD a fortnight for singles and AUD a fortnight for couples per person. Disability Disability Support Pensions are effective from September 20, Death Medical Maximum rate of Disability Support Pension (over 21, or under 21 with children): For single persons the maximum payment is AUD per fortnight. For couples the maximum payment is AUD per person per fortnight. If less than 21 rates vary by an amount determined by individual circumstances between AUD and AUD Disability Support Pension is subject to an income test and an assets test, some exceptions exist. The right to a Bereavement Allowance depends on different factors. The maximum rate of Bereavement Allowance is AUD per fortnight. This payment rate is effective from September 20, All Australian residents are covered by government operated Medicare. Employee Reference Manual Swiss Life Network

2 Private Benefit Plans Eligibility Retirement Age Contributions Retirement Disability Death Medical Vesting To be eligible for superannuation (old age pension) the employee must generally fulfil the following: Aged 18 years or over but under 70 years of age, and Paid AUD 450 before tax per month or more for any calendar month in the relevant quarter Term used in Australia is Preservation Age: Eligibility for access to preserved benefits depends on a worker's preservation age, which depends on their date of birth. The preservation age for members born before 1 July 1960 is 55, and it will gradually increase until 2024 when it will become age 60 for members born on or after 1 July The minimum employer superannuation guarantee (SG) contribution is 9.50% of each eligible employee s earnings base. Employees can make voluntary contributions. The SG rate will now remain at 9.5% until 30 June 2021, and will increase to 12% by 1 July Employers are required to contribute to complying super funds of eligible mature age employees of any age. Different types of benefits possible: Lump sum, defined contributions (accumulation, standard for most plans); or Lump sum, defined benefit. Same as death. For accumulation style plans: Death Benefit = account balance + any life insurance payment. While the rate of participation in private health insurance has increased, several government initiatives have resulted in a decrease in the number of employers providing medical insurance for employees. Vesting of the benefits provided by the employer s contributions in excess of the superannuation guarantee level is at the discretion of the employer. Employer contributions at the superannuation guarantee level and employee s own contributions are fully preserved. Taxation Contributions Generally deductible. 15% contribution tax. 15% earnings tax. Superannuation benefits paid from a taxed source either as a lump sum or pension will be tax-free when paid to people aged 60 and over. A lump sum death benefit payment will also generally be tax-free if paid to a dependant, where a dependant includes a spouse or former spouse, child under 18 years of age, interdependent or financially dependent. Lump sum benefits paid before age 60 have two components, a tax-free component and a taxable component. Reasonable Benefit Limits (RBL s) have been abolished effective July 1, This means that it is possible to accumulate larger super benefits without being subject to tax. Employee Reference Manual Swiss Life Network

3 II INTRODUCTION Country Statistics Population/ Growth rate Age structure: 0-14 years: years: years: years: 65 years and over: GDP purchasing power parity Real growth rate Agriculture Industry Services Unemployment rate Inflation rate Annual gross salary* Semi-professionals* Professionals* Management* Legal minimum wage Exchange rate on 27 February 2015 Currency: Australian Dollar 23,717,788 (July 2014 est.) 1.6% (2014 est.) Median Age: 37.3 years 18.% 13.3% 41.8% 11.8% 15.1% (2014 est.) USD billion (2013 est.) 2.5% (2013 est.) 3.8% 27.4% 68.7% (2013 est.) 6.1% (December 2014 est.) 2.3% (September 2014 est.) in AUD General: 51,815 Skilled: 65,187 Junior: 82,010 Senior: 103,175 Lower: 129,801 Upper: 188, AUD per hour / AUD per week 1 AUD = USD 1 AUD = EUR *Source: Mercer s International Geographic Salary Differentials, Edition 2015 Legislation and Insurance Market Update in Brief No major changes in legislation or the insurance market in Employee Reference Manual Swiss Life Network

4 III SOCIAL SECURITY Background Information Australia s retirement savings system is built on three pillars: First pillar: the age pension safety net, funded from general taxation revenue and with flat rates regardless of previous earnings, but means tested. Second pillar: the superannuation guarantee, i.e. compulsory, concessionally taxed savings through an employer based system; the current minimum superannuation guarantee level is 9.50%. The superannuation guarantee rate will now remain at 9.5% until 30 June 2021, and will increase to 12% by 1 July Third pillar: voluntary contributions to superannuation, which encourages voluntary superannuation contributions assisted by tax concessions. The Australian social security system covers a wide cross-section of the community, including those in the labour force, as well as people with no previous employment. Commonwealth government acts regulate social security benefits. The means-tested income support provided by the Australian system is at a flat rate. Income support payments are provided according to principles of need rather than previous income. The government funds social welfare benefits by a national, general revenue-funded system. The real value of most social security payments has been maintained through indexation. Eligibility Eligibility varies depending on the benefit, but most require Australian residency or at least 104 weeks of residency for newly arrived immigrants. Contributions All benefits are funded out of government general revenue. Retirement Retirement Age The qualifying age for the Australian Age Pension is 65 years. As of July 1, 2017, the qualifying age for Age Pension will increase from 65 to 65.5 years. The qualifying age for Age Pension will then rise by 6 months every 2 years, reaching 67 by July 1, Employee Reference Manual Swiss Life Network

5 Qualifying Conditions The recipient must be living in Australia on the date of application and, in general, must have lived in Australia continuously for at least 10 years at any time. are provided to residents with low-income or those with special needs. Need is assessed by a Basic Income Test and a Basic Asset Test. Basic Income Test: A full pension is paid where other fortnightly income does not exceed AUD 160 for a single person or AUD 284 for a couple (combined). Other fortnightly income includes wages, interest, dividends or rent. Income in excess of these amounts decreases the rate of payable pension by 50% (single) or 25% (couple). These fortnightly income figures are increased by AUD for each dependent child. There is no income test for a blind pensioner. (Source: Basic Assets Test: Assessable assets include cars, boats, farms, businesses, shares, bank accounts, etc., but the principal residence is excluded. The full pension is paid if the value of assets does not exceed AUD 202,000 for a single person (home-owner) or AUD 286,500,000 for a partnered couple (home-owner). These levels are increased by AUD 146,500 for non-home-owners. The pension decreases by AUD 1.50 per fortnight for every AUD 1,000 above these limits. The assets test only applies if it results in a pension entitlement lower than that produced by the income test. It does not apply to a blind pensioner. (Source: The basic rate of pension is: Standard (single rate), up to AUD every fortnight Couple (combined rate), up to AUD per person every fortnight Additional payments and benefits that may apply are: pharmaceutical allowance, rent assistance, telephone allowance, remote area allowance, pension concession card. Disability Qualifying Conditions To qualify, applicants must: Not be able to work for 15 hours or more per week at or above the relevant minimum wage or be re-skilled for such work for at least the next 2 years because of illness, injury or disability, or Be working under the Supported Wage System (SWS), or Be permanently blind; and Be aged at least 16, but less than the old age pension age on the day the claim is made; and They must meet residence requirements. The maximum rate of disability pension (Disability Support Pension) for a single person over 21 amounts to AUD for each 2-week period and to AUD per person for a couple. If less than 21, rates vary by an amount determined by individual circumstances between AUD and AUD (www.humanservices.gov.au) Employee Reference Manual Swiss Life Network

6 Death Qualifying Conditions Assistance is provided to persons following the death or loss of a person in receipt of certain federal support payments. Bereavement allowances provide short-term (up to 14 weeks) assistance to recently widowed people and others to allow them to adjust to changed financial circumstances, immediately following bereavement. Maximum rate of bereavement allowance: up to AUD per two-week period, paid for up to 14 weeks from the date of death of the partner, but can be extended if the widow is pregnant; is subject to income and assets test. (Source: Sickness Qualifying Conditions Claimants must be at least 22 years and have not reached old age pension eligibility age. A candidate must be an Australian resident, temporarily unable to work due to illness or injury and must have a job or full-time study to return to upon termination of sickness. The amount paid depends on a variety of factors including age, having a partner, dependants and asset and income test. The full sickness allowance per two-week period amounts to: AUD for a single person without children, AUD for a single person with children, AUD for a single person, aged 60 or over, after 9 months in receipt of benefit, AUD per partnered person (each). (Source: Medical/Health Qualifying Conditions All Australian residents are covered by Medicare, a government-operated health scheme introduced in 1984, which is compulsory and financed partly through a tax levy on individuals taxable income. In addition, a resident underprivileged citizen, usually due to low income, is issued a health care card. Health care cards are issued for 6- month periods and become invalid if the cardholder s income increases over a set limit. Health care cardholders are entitled to a range of free pharmaceuticals and services. Employee Reference Manual Swiss Life Network

7 Medicare was established based on the understanding that all Australians should contribute to the cost of health care according to their ability to pay. It is financed through progressive income tax and an income-related Medicare levy. Medicare provides access to: Free treatment as a public (Medicare) patient in a public hospital, Free or subsidised treatment by medical practitioners including general practitioners, specialists, participating optometrists or dentists (for specified services only), Free ancillary services such as dental and optical care, provided that they are carried out in a public hospital designed for such purposes, Some discounts on prescribed pharmaceuticals. Through the Pharmaceutical Scheme (PBS), the Australian government makes a range of necessary prescription medicines available at affordable prices to all Australian residents and those overseas visitors eligible under reciprocal health care agreements. Work Injury Qualifying Conditions Employers are required by law to have a work injury insurance policy which covers their workers in the event they suffer a work related injury or illness. These policies ensure that injured/ill workers receive financial compensation for lost wages, medical expenses and permanent incapacity. Employers are liable to pay compensation to a worker who is injured, or to the dependants of a worker who is killed, if the employment was a substantial contributing factor to the injury or death. The scheme also covers injuries that happen travelling to and from work, and to and from a job-related educational institution. Every employer must take out and keep up-to-date a work injury insurance policy covering all their workers. The penalty for non-insurance is a fine and/or imprisonment. There is also the additional penalty of double premiums as well as the cost of any claims paid on the employer s behalf. Unemployment Qualifying Conditions There are two programmes of unemployment benefits: The youth training allowance provides for people under the age of 21 who are unemployed or under the age of 25 who are in full-time study. The Newstart Allowance applies to people over the age of 21 but under the age for old age pension eligibility. The person must register as unemployed with Centrelink (the Australian government agency delivering a range of services to the community). The candidate must have income and assets below a certain amount, be prepared to enter into, comply with or vary an existing preparing for work agreement and satisfy the activity test and mutual obligations. Advance payments and entry payments may be available. The claimant must also be willing to enter into an activity agreement if required, allowing participation in a broad range of activities. The basic allowance rates under the Newstart Allowance programme are the same as for sickness allowance. Employee Reference Manual Swiss Life Network

8 Other Family Tax Benefit A To be eligible for Family Tax Benefit Part A, the insured person must have: A dependent child under age 16, or A dependent child aged years who: has completed a Year 12 or equivalent qualification, is undertaking full-time education or training leading to a Year 12 or equivalent qualification, has been granted an exemption from this requirement, or A dependent full-time student aged 21 24, or Have care 35% of the time, and Income under a certain amount. The amount of Family Tax Benefit Part A one receives depends on the actual family income, how many children one has, and how old they are. If the family s adjusted taxable income is AUD 50,151 or less, the payment will not be affected by the income test. In most cases, the Family Tax Benefit Part A payment is worked out using two income tests. The test that gives the highest rate of payment will apply: The first test reduces the maximum rate of Family Tax Benefit Part A by 20 cents for each dollar above AUD 48,837 until the payment reaches the base rate of Family Tax Benefit Part A. The second test reduces the base rate of Family Tax Benefit Part A by 30 cents for each dollar above AUD 94,316 (plus AUD 3,796 for each Family Tax Benefit child after the first) until the payment reaches nil. Maximum rate of Family Tax Benefit A: For each child aged 0 12 years: AUD For each child aged years: AUD For each child aged years, secondary student: AUD For each child aged years, having completed secondary study: AUD For each child aged up to 19 years of age in an approved care organisation: AUD (Source: Family Tax Benefit B Family Tax Benefit Part B is an extra payment for single parents and families with one main income to help with the costs of raising children. Part B is limited to families where the primary earner has an adjusted taxable income of AUD 150,000 or less per financial year. Maximum rate of Family Tax Benefit B: AUD if youngest child under 5 years per fortnight AUD if youngest child between 5-18 years per fortnight (Source: Parenting To qualify for Parenting Payment either as a parent, grandparent or foster carer, the person: Is single and cares for at least one child aged under 8 years, or Has a partner and cares for at least one child aged under 6 years, and Their own income and that of the partner and their assets are below a certain amount. Employee Reference Manual Swiss Life Network

9 If the insured person is granted Parenting Payment (single), part-time participation will become compulsory from the time the youngest child turns 6. Grandfathered Parenting Payment customers will have participation requirements when their youngest child is aged 7 years or older. Payment rates of Parenting Payment effective from September 20, 2014: AUD partnered, AUD partnered, but separated because of illness, respite care or prison, AUD for a single person. (Source: Taxation Tax payable by an ordinary individual resident taxpayer is calculated by taking into account taxable income (salaries, wages, rents, interest etc.) to which the general tax rate is applied. From this, various deductions can be made. Income Tax Rates - July 1, 2014 Taxable income in AUD Tax rate* 0 18,200 NIL 18,201 37,000 19c for each AUD 1 over AUD 18,200 37,001 80,000 AUD 3,572 plus 32.5c for each AUD 1 over AUD 37,000 80, ,000 AUD 17,547 plus 37c for each AUD 1 over AUD 80, ,001 and up AUD 54,547 plus 45c for each AUD 1 over AUD 180,000 *Rates shown do not include the Medicare levy (2%), the Medicare levy surcharge (1% where applicable) and Temporary Flood and Cyclone Reconstruction Levy and the above rates do not include the Temporary Budget Repair Levy. The Temporary Budget Repair Levy is payable at a rate of 2% for taxable incomes over $180,000. Business Rates July 1, 2014 Complying superannuation 15% Non-complying superannuation 45% Company 30% Fringe Benefit Tax 47% for year ending 31 March 2015 Other Information Reciprocal Social Security Agreements Austria, Belgium, Canada, Chile, Croatia, Cyprus, the Czech Republic, Denmark, Finland, Germany, Greece, Ireland, Italy, Japan, Korea (Republic), Macedonia, Malta, the Netherlands, New Zealand, Norway, Poland, Portugal, Slovakia, Slovenia, Spain, Switzerland, the United States of America. Employee Reference Manual Swiss Life Network

10 IV PRIVATE BENEFIT PLANS Background Information In Australia, private retirement plans are generally known as superannuation plans, or simply superannuation. The Superannuation Industry (Supervision) Act 1993 (SISA) and its regulations (SISR) are the governing legislation for the regulation of superannuation funds. Compliance with SISA prudential requirements and other regulatory provisions constitutes one of the conditions for an entity to qualify as a complying superannuation fund. APRA (Australian Prudential Regulation Authority) and ASIC (Australian Securities and Investments Commission) and the Commissioner of Taxation have general administration responsibility of SISA. Superannuation funds may be categorized as follows: Corporate or employer-sponsored funds, Industry funds, Retail funds and public offer funds: including master trusts (an umbrella trust or fund which uses a single trustee and a single common trust deed to operate the superannuation arrangements for unconnected individuals and/or companies), Public sector funds, Small APRA funds, Self-managed superannuation funds. There is a clear delineation of the basic trustee duties, with the trustees having the primary responsibility for the operation of the fund. Direct supervisory powers are vested in APRA for the enforcement of prudential requirements and the obligations of trustees. The Superannuation Guarantee (Administration) Act 1992 (SGAA) prescribes a minimum level of superannuation support which employers must provide for each employee. Choice of Fund legislation came into effect on July 1, 2005, impacting millions of Australians. The legislation gives employees (under particular employment conditions) the right to choose which complying fund their employer pays their superannuation contributions into. Generally this applies to employees not covered by a Federal workplace agreement or not covered by a state award or industrial agreement. Employees are not compelled to make a choice. If they do not make a choice, the employer will pay the contributions into a selected default fund. The default fund must offer life insurance to members as follows: At a premium of at least AUD 0.50 per week for those under 56 years, or With at least the level of insurance cover shown below: Minimum life insurance cover Age range Level of insurance 20 to 34 AUD 50, to 39 AUD 35, to 44 AUD 20, to 49 AUD 14, to 55 AUD 7,000 Or, if the contributions are made to a defined benefit fund on behalf of a defined benefit member, at a level of cover equivalent to the table above. Employee Reference Manual Swiss Life Network

11 In order to reduce the burden of the Federal Government of providing retirement benefits, steps have been taken to ensure that those benefits are used for retirement. When an employee is terminated from service below the age of 55, that portion of the resignation benefit accrued after July 1, 1994, which represents the minimum level of employer sponsored benefit prescribed by legislation, must be preserved until the preservation age. The preservation age is currently 55, but will gradually increase to 60 by the year The preservation age applicable to a person depends on the birthday of the person as set out in the table below: For a Person Born Preservation Age Before July 1, July 1, June 30, July 1, June 30, July 1, June 30, July 1, June 30, After June 30, Superannuation plans mostly provide lump sum benefits. Pension plans generally provide the right to commute up to 100% of the pension. Past experience indicates that the majority of members commute their pensions for tax reasons and also to gain the financial flexibility offered by a lump sum. Through a combination of legislation and financial incentives, the government is encouraging retirees to take an income benefit. There is a tendency to move from defined benefit plans to defined contribution plans as superannuation is usually regarded as deferred pay rather than a special benefit conferred on the employee. Eligibility With the introduction of the superannuation guarantee act all employees earning in excess of AUD 450 per month have a minimum level of superannuation coverage fixed by their employers. Contributions The minimum level of employer contribution prescribed by the superannuation guarantee act is expressed as a percentage of the employee s remuneration. The current minimum superannuation guarantee level is 9.50%. Superannuation plans are always funded via a trust, whose trustees may be employees, management or a corporate trustee. The vast majority of plans must have equal employer and employee representation on the board of trustees. The full range of funding vehicles is available, including deposit administration contracts, investment linked managed funds and pooled funds, as well as individual portfolio investment management for larger schemes. Death, disability and medical benefits are usually reinsured, although larger plans may bear the total risk. Retirement Retirement Age Please refer to Preservation Age above. Pension Plans are virtually non-existent. Most employer sponsored superannuation plans provide lump sums rather than pensions, reflecting an ingrained preference among Australian employees. Employers continue to move to Employee Reference Manual Swiss Life Network

12 defined contribution plans. In many cases, this may be through master-trust arrangements or multi-employer industry plans. The following retirement benefits are common: Superannuation guarantee - a minimum benefit applies in the case of defined benefit plans and minimum contributions (9.50%) apply in the case of defined contribution plans. Lump sum defined benefit plans the benefits usually depend on prospective years of membership and class of employee. For example: Class of Employee Percentage of Final Average Salary for Each Year of Membership Blue-collar workers 3% % Salaried staff 12.5% % Executives 15% - 25% and more Lump sum defined contribution plans - a typical plan would be: Class of Employee Contribution as a Percentage of Salary Member Employer Blue-collar workers Voluntary Superannuation Guarantee (SG) Salaried staff Voluntary Minimum SG - 12% Executives Voluntary Minimum SG - 15% The cost of administration and the cost of death and permanent disability cover are deducted from these contributions. The balance is invested. Vesting Vesting under superannuation means that a member is entitled only to a proportion of the employer contributions (excluding award/superannuation guarantee). This is normally based on the years of service of a member and increases depending on the length of service. Award/superannuation guarantee and member contributions are fully and immediately vested in all cases. Compulsory superannuation portability was introduced on July 1, It is a legislative mechanism to allow for the consolidation of superannuation accounts and gives employees the right to transfer their superannuation savings to the fund of their choice if it no longer receives employer contributions. Disability Usually a lump sum is paid, which is the same amount as death. Death For accumulation style plans: Death Benefit = account balance + any life insurance payable. Sickness Some employers have monthly income benefit plans, financed through specialist life and general insurers, to supplement the company sick leave provisions. Generally, membership is extended to all full time permanent salaried staff. Insured income benefits range from 60% to 80% of salary. Employers may choose from various qualifying periods, ranging from 14 days to 180 days with benefit payment periods from 12 months up to age 65. Employee Reference Manual Swiss Life Network

13 Medical/Health Many Australians take out private health insurance to supplement the benefits provided by Medicare. Depending on the type of cover purchased, private health insurance provides cover for all or part of hospital theatre and accommodation costs in either a public or private hospital, medical costs in hospital, and costs associated with a range of services not covered under Medicare including private dental services, optical, chiropractic, home nursing, ambulance and natural therapies. The introduction of Medicare in 1984 resulted in a steady decline of participation in private health insurance. However, the introduction of the federal government 30% rebate on private health insurance in 1999, and the government s Lifetime Health Cover policy in 2000, as well as a 1% income tax surcharge for high-income earners who do not purchase private medical insurance saw participation in private hospital cover increase dramatically. From 1 July 2012 legislation to income test private health insurance became effective. The level of rebate a single person or family will receive on their private health insurance and the amount of Medicare Levy Surcharge they pay is determined based on the following income thresholds: (Source: In AUD Base tier (no change) Tier 1 Tier 2 Tier 3 Singles 88,000 or less 88, , , , ,001 or more Families 176,000 or less 176, , , , ,001 or more Private health insurance rebate entitlement Under 65 years old 29.4% 19.36% 9.68% 0% years old 33.88% 24.2% 14.52% 0% 70 years old or over 38.72% 29.04% 19.36% 0% Medicare levy surcharge Rate 0.0% 1.0% 1.25% 1.5% Employer-sponsored private medical insurance is not commonplace in Australia since the introduction of the following government initiatives: Legislation against self-insuring medical benefits, Fringe benefit tax on non-cash employee benefits of 46.5%, thus making it more expensive for all employees except those in the top marginal tax rate bracket to be given medical insurance, rather than cash to buy their own insurance, Levels of premium discounts. Other Withdrawal Any new or additional employer-financed benefits must be preserved until retirement or after reaching retirement (age 55 60, depending on year of birth). Usually, the minimum withdrawal benefit is the return of the member s own contributions, plus the superannuation guarantee contributions plus any vested employer contributions at July 1, 1992, increased by interest. The declared interest rate must be close to the actual earnings rate of the fund. Employee Reference Manual Swiss Life Network

14 Additional for Executives These benefits are usually restricted to management or executive levels, but maybe subject to a fringe benefit tax. The most common benefits are: Generous private retirement plans (contributions are not subject to fringe benefits tax), Employee contributions paid on behalf of the employee by the employer with an equivalent reduction in gross salary, Group insurance for temporary and total disability, to offset loss of income due to illness or injury, Additional hospital and medical benefits to supplement those provided under basic hospital and medical insurance plans, Low interest loans for the purchase of an executive s principal home, Low interest loans for purposes other than home purchase, A company-owned or leased car provided for the executive s personal use, (the company usually provides reserved parking and meets all running costs, including petrol), Club membership fees. Taxation Employer Contributions Employer contributions to employee benefit plans are deductible from assessable income up to a Maximum Deductible Contribution (MDC) limit, provided the plans have been designed correctly. MDC Limit in AUD Age of member 2002/ / / / / to 2009 Under to to 70 12,651 35,138 87,141 13,233 36,754 91,149 13,934 38,702 95,980 14,603 40, ,587 15,260 42, ,113 50,000, indexed to AWOTE 2009 to 2014/ ,000 30,000 Super Co-Contribution The super co-contribution was introduced on July 1, The tax office uses information on a person s income tax return and contribution information from their superannuation fund or RSA to work out whether they are eligible. If a person is eligible, the tax office will automatically calculate the super co-contribution amount and deposit it into the person s super account. Employee Reference Manual Swiss Life Network

15 Calculation basis: Lower income threshold Higher income threshold What will I receive for every dollar of personal super contributions? AUD 33,516 AUD 48,516 AUD 1, up to your maximum entitlement. What is my maximum entitlement? The maximum entitlement is AUD1,000. However, the person must reduce this by cents for every dollar if their total income, less allowable business deductions, is over AUD 33,516, up to AUD 48,516. Spouse Contributions Rebate If a person s spouse has assessable income of less than AUD 13,800, then they can make super contributions on behalf of their spouse and claim a tax offset of up to AUD 540. Investment Income of Superannuation Plans The investment income and capital gains are taxed at 15%. Tax rebates are available in respect of franked dividends (i.e. dividends paid from post-tax earnings). Employment Termination Payments (ETP) These are lump sum payments from employers, superannuation and rollover funds or retirement savings accounts which are treated as income and taxed on concessional basis. Life benefit employment termination payments will not be subject to tax on any tax-free component (invalidity or pre- July 1983 amounts), or will be concessionally taxed up to a cap of AUD 185,000 for Comparison of the system up to June 30, 2007 and the system from July 1, 2007: Component Up to June 30, 2007 From July 1, 2007 Pre-July % taxed at marginal rates Exempt component Concessional Undeducted contributions Post-June 1994 invalidity Capital gains tax exempt 5% taxed at marginal rates Exempt Exempt Exempt Non-qualifying Marginal rates Taxable component Post-June 1983 Taxed as per table below (see below) Excessive 38% Abolished Employee Reference Manual Swiss Life Network

16 Taxable Component: Taxpayers age From July 1, 2007 Under 55 Pre-July 1983 Component: 0% Post-June 1983 Component: 30% Age 55 or older Pre-July 1983 Component: 0% Post-June 1983 Component: Up to threshold (AUD 135,590): 15% In excess of threshold: 30% Medicare Levy Surcharge Introduced in 1997/1998 the Medicare levy surcharge of 1% (in addition to the Medicare levy of 1.5%) applies to high income taxpayers without adequate private patient hospital insurance. The surcharge is levied on the taxpayer s entire taxable income and not merely on the portion of the taxable income in excess of the relevant income threshold. The Medicare levy surcharge income threshold is AUD 90,000 for single persons (the single threshold applies to a single person without a dependent child or children) and AUD 180,000 per family. Transfers of Accumulated Policy Reserves from Abroad Generally no tax liability. Benefit Payments from Abroad Pensions paid by countries with which Australia has a double taxation agreement are generally exempt from tax in the country of origin and subject to tax in Australia. If a pension is taxed in the country of origin, credit is allowed in an Australian taxation assessment for the overseas tax paid, to the extent that it does not exceed the Australian tax payable on that income. Double Taxation Agreements Argentina, Austria, Belgium, Canada, Chile, China, the Czech Republic, Denmark, Fiji, Finland, France, Germany, Hungary, India, Indonesia, Ireland, Italy, Japan, Kiribati, Korea (Republic), Malaysia, Malta, Mexico, the Netherlands, New Zealand, Norway, Papua New Guinea, the Philippines, Poland, Romania, Russian Federation, Singapore, Slovakia, South Africa, Spain, Sri Lanka, Sweden, Switzerland, Thailand, Timor-Leste, Turkey, the United Kingdom, the United States of America and Vietnam. Other Information Financial Year July 1 to June 30 each year Departing Australia Superannuation Payment (DASP) Temporary residents who permanently depart Australia can claim any superannuation benefits they accumulated while working in Australia, as long as they visited on an eligible temporary resident visa (which has expired or been cancelled). As of April 1, 2009, there are new withholding tax rates for DASPs. If the DASP application is made on or after April 1, 2009, the new withholding tax rates apply. These rates are: 0% for the tax-free component, Employee Reference Manual Swiss Life Network

17 35% for a taxed element of a taxable component, 45% for an untaxed element of a taxable component. However, it is not compulsory to claim these benefits. They can be preserved until retirement age. This change came into force on July 1, 2002, but also applies to people who have already left Australia. The provision does not apply to Australian or New Zealand citizens. Employee Reference Manual Swiss Life Network

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