Super taxes, caps, payments, thresholds and rebates

Transcription

1 Fact Sheet Super taxes, caps, payments, thresholds and rebates This fact sheet provides a useful one-stop reference guide to the tax rates, caps, thresholds and rebates that apply or are related to superannuation contributions and payments. Index 1. Tax and caps on contributions. Tax on amounts transferred into First State Super 3. Tax on amounts for those permanently departing Australia 4. Tax on investment earnings 5. Tax on lump sum superannuation payments 6. Tax on income stream payments 7. Minimum annual income stream payment amounts 8. Tax on lump sum payments on terminal illness 9. Super guarantee (SG) payments 10. The Government co-contribution 11. Low income superannuation contribution 1. Individual income tax/pay-as-you-go (PAYG) rates 13. Medicare and applicable levies 14. Company tax rate 15. Employment termination payments 16. Tax-free part of genuine redundancy payments and early retirement scheme payments 17. Tax rebates 18. Spouse rebate 19. Tax deduction for self-employed contributions 0. Tax deduction for employer contributions 1. Tax and caps on contributions The government provides certain tax benefits for super to encourage you to save for your retirement. But there s a limit to this generosity in the form of caps on the amount you can contribute at concessionally-taxed rates. The tax and caps that apply are different for before-tax (concessional) and after-tax (non-concessional) contributions. This section outlines these differences. (Our preference is to call them before-tax and after-tax contributions, so they are the terms we ll use in this fact sheet.) The caps discussed in this fact sheet apply in total across all the funds to which you contribute, they do not apply to each fund. What are before-tax contributions? These include the compulsory superannuation guarantee (SG) contributions that your employer pays on your behalf (currently 9.5%), salary sacrifice contributions, and personal contributions for which you claim a tax deduction. The caps on contributions apply to all your super funds... not to each fund Module 3.13 Managing Super taxes, caps, payments, thresholds and rebates 1

2 Fact Sheet Super taxes, caps, payments, thresholds and rebates What is the before-tax contribution cap? There are limits called contribution caps on the amount of before tax contributions that will be taxed at the 15% concessional rate 1. 1 Generally, if your income plus your before-tax super contributions are greater than $300,000, you ll need to pay an additional 15% tax on the contributions over $300,000. The general annual limit is $30,000. A higher limit of $35,000 applies to anyone who is 50 or over, or who turns 50 during the financial year in which the contribution is made. This cap is indexed in line with Average Weekly Ordinary Time Earnings (AWOTE). It s important to remember that if you contribute to more than one super fund, the cap applies to all the funds you contribute to. It s not an individual cap for each fund. What are after-tax contributions? These include any personal contributions that you make to your super and those contributions paid into your account by your spouse for which you cannot claim a tax deduction. What is the after-tax contribution cap?* For the and the financial year, the after-tax contribution cap is $180,000. If you are aged 64 or less at 1 July (in the year in which you make the contribution), you can use the bring forward rule to make up to three years worth of contributions (i.e. up to $540,000) in a single year. If you make the maximum contribution, you won t be able to make any more contributions during the three-year period. Once you turn 65, you can no longer use the bring forward rule, and you must also satisfy the work test which requires you to work at least 40 hours in any consecutive 30-day period during the same financial year in which the contributions are made. Summary of tax and caps on contributions What is the cap? What tax is payable on these contributions? If you haven t provided your tax file number Before-tax contributions $30,000 OR $35,000 if you are 50 or over, or turn 50 during the financial year 15% tax on contributions up to the cap. If you exceed this cap, you can apply to the ATO to have up to 85% of the excess contributions returned. The excess contributions will then be taxed at your marginal tax rate with interest payable to reflect that the tax on excess contributions is collected later than normal tax. An additional 34% tax After-tax contributions* $180,000 OR $540,000 over a three-year period if you are aged 64 or less on 1 July From the financial year, if you make non-concessional contributions above the caps, you will be given the opportunity to withdraw the excess amount from your super fund, together with 85% of the associated earnings (using a release authority issued by the ATO). The earnings will be taxed at your marginal tax rate less a 15% rebate. We cannot accept your contribution Generally, if your income plus your before-tax super contributions are greater than $300,000, you ll need to pay an additional 15% tax on the contributions over $300,000. * The Government announced in the Federal Budget that a new $500,000 lifetime cap will apply from 3 May 016 to all non-concessional contributions, made from 1 July 007. Any contributions that have exceeded the lifetime cap before 3 May 016 will be disregarded but you will be deemed to have exhausted your cap. While this is not yet law, the proposal indicates that individuals that exceed the new lifetime non-concessional cap after budget night, 3 May 016, will be notified by the Australian Tax Office to withdraw the excess from their superannuation account. It is expected that the current penalties applying to non-concessional cap excesses will continue to apply to the proposed $500,000 cap.. Tax on amounts transferred into First State Super Lump sum tax is not payable if you transfer money held in other super funds into First State Super. However, if the amount transferred comes from a superannuation fund which has not been subject to tax (usually government retirement schemes), then the untaxed element of the taxable component (up to $1.395 million for and $1.415 million for ) of that amount will be taxed at 15% on entry to the fund. For amounts over these thresholds, the paying fund will deduct PAYG tax before sending the money. 3. Tax on amounts for those permanently departing Australia Where superannuation is paid to a temporary resident who is permanently departing Australia, different tax treatments apply to the taxed and untaxed components of their benefit. Read our fact sheet Departing Australia Superannuation Payments for more information. 4. Tax on investment earnings The investment earnings of complying superannuation funds (excluding income stream products) are taxed at a maximum of 15%. The actual rate may be less than 15% due to the effect of various tax credits and offsets. Module 3.13 Managing Super taxes, caps, payments, thresholds and rebates

3 5. Summary of tax treatment of lump sum superannuation payments Age or circumstance Taxable component Tax free component Total benefit under $00 Tax free Tax free Under your preservation age Taxed at 0% plus Medicare and applicable levies Tax free Your preservation age up to age 59 Age 60+ Tax free up to the low rate threshold 1 of $195,000 (for and ). Amounts above the threshold will be taxed at a flat rate of 15% plus Medicare and applicable levies All benefits from a taxed fund such as First State Super are tax free Tax free Death benefits No tax is paid on lump sum death benefits paid to a death benefit dependant as defined in the tax legislation. The taxable component of a lump sum paid to a non-dependant is taxed at 15% plus Medicare and applicable levies Note that if you have not provided your TFN, tax will be withheld on the taxable component at the highest marginal rate if you are under age The Federal government has indexed the amount of the low rate threshold to Average Weekly Ordinary Time Earnings (AWOTE), but indexation will only take effect when the increase is greater than $5,000. For example, if AWOTE is 3%, then the increase on $150,000 is $4,500 and the threshold will not be increased. The indexation is rounded down to the nearest $5,000 so that the threshold will be increased in the year when the sum of the increments is in excess of $5, Summary of tax on income streams Item The amount you roll into set up your income stream account Investment returns Regular income stream payments Aged 60 or over Preservation age or over but under age 60 Under preservation age Lump sum payments from your income stream Death benefits Tax treatment Nil (unless the rollover contains an untaxed element of the taxable component) No tax while the benefit stays in your income stream account. No tax (with or without your TFN). Taxed at your personal marginal tax rate (15% tax offset is available). Taxed at your personal marginal tax rate (with no tax offset. Tax offset of 15% is available if the payment is a disability superannuation benefit). See Section 5 No tax is paid on lump sum death benefits paid to a death benefit dependant as defined in the tax legislation. The taxed element of the taxable component of a lump sum paid to a non-dependant is taxed at 15%. Where the trustee makes a payment to the member s estate, it will be paid as a tax-free lump sum and the executor or legal personal representative of the estate will be responsible for paying the relevant tax. Income stream members can elect to have their death benefit paid as a reversionary income stream to their spouse. The taxation of a reversionary pension depends on the ages of both the deceased member and reversionary beneficiary. The income stream will be tax free if either the: 55deceased member was aged 60 or older at the time when they died 55reversionary beneficiary is aged 60 or older (at the time the income stream payments are made). The reversionary beneficiary will pay tax as follows until they reach age 60, when the payments will be tax free: 55no tax will be payable on the tax-free component 55the taxable component will be included in the reversionary beneficiary s assessable income, but they will be entitled to a 15% tax offset. plus Medicare and other applicable levies. Tax file number If you are under age 60, you may wish to complete a Tax file number declaration form. This form allows us to determine the amount of PAYG tax that is to be deducted from your income stream payments. It is not compulsory to complete the declaration form or supply your tax file number, but if you don t, PAYG tax will generally be deducted from your payments at the top marginal tax rate (plus Medicare and other applicable levies). This form is included as part of the member booklet for income stream members. 3

4 7. Minimum annual income stream payment amounts The minimum annual income stream payment amount is the minimum income payment that you must take from your income stream for the financial year. The minimum is expressed as a percentage of your account balance at the start of the financial year, and it increases with your age. For income streams that start part-way through the financial year, this amount is calculated on a pro-rata basis. The table below shows the standard minimum rate. Age Standard minimum % withdrawal Under 65 4% % % % % % 95 or more 14% Source: Australian Taxation Office 8. Tax on lump sum payments on terminal illness The Trustee is not required to withhold tax from lump sum super payments made to terminally ill members where two medical practitioners (at least one of whom is a specialist in the condition from which the member is suffering) certify that the member is suffering from an illness that in the normal course would result in death within a period of 4 months from the date of certification. 9. Super guarantee (SG) payments The current superannuation guarantee (SG) rate is 9.5% of ordinary time earnings (OTE). The SG rate will gradually increase from 9.5% to 1% between 1 July 01 and 1 July 05. Financial year period SG rate 01-10% % % % 05 and onwards 1.0% 10. The government co-contribution If you are eligible and you make personal after-tax contributions to superannuation, the government will match your contribution up to a certain amount. Personal contributions for which a tax deduction has been allowed do not count towards the co-contribution. The government has reduced the maximum contribution amount to 50% of your contribution up to a maximum amount of $500. The amount of co-contribution the government will pay drops as you move from the lower income threshold of $35,454 in and $36,01 in to the higher income threshold of $50,454 for and $51,01 for and cuts out completely when your total income has reached the higher income threshold. 11. Low income superannuation contribution The low income earners superannuation contribution (LISC) payment is calculated at a rate of 15% of the eligible concessional (before-tax) contributions for the year with a maximum amount payable of $500. If you have an adjusted taxable income of up to $37,000 in the financial year you may be eligible for this benefit. The government provides certain tax benefits for super to encourage you to save for your retirement firststatesuper.com.au Call enquiries@firststatesuper.com.au 4

5 Fact Sheet Super taxes, caps, payments, thresholds and rebates 1. Individual income tax/pay-as-you-go (PAYG) rates Taxable income Tax 0 $18,00 Nil $18,01 $37,000 19c for each $1 over $18,00 $37,001 $80,000 $3,57 plus 3.5c for each $1 over $37,000 $80,001 $180,000 $17,547 plus 37c for each $1 over $80,000 $180,001 and over $54,547 plus 45c for each $1 over $180,000 These rates do not include Medicare or other applicable levies. Source: ATO website Medicare and other applicable levies Medicare levy Resident taxpayers pay a Medicare levy to have access to health care. Generally it is % of your taxable income, but it may be reduced or you may be exempt from the levy depending on your income and/or your circumstances. The thresholds are higher for seniors. If your taxable income is above the thresholds, you may still qualify for a reduction based on your family taxable income. Temporary budget levy Residents and non-residents with a taxable income of more than $180,000 per year pay a temporary budget repair levy 3 of % on amounts over $180,000. In some cases the levy is payable even if you have a taxable income of $180,000 or less. These levies are withheld by your payer, along with the tax you need to pay on your income. For more information, visit the ATO website. Applied from 1 July Applies from 1 July 014 until 1 July Company tax rate A 30% tax rate applies to companies including corporate limited partnerships, strata title bodies corporate, trustees of corporate unit trusts and public trading trusts. The tax rate for small business entities (aggregated turnover of less than $ million) is 8.5%. 15. Employment termination payments An employment termination payment (ETP) is made when someone s employment is terminated. It can include: 55amounts for unused rostered days off 55amounts in lieu of notice 55a gratuity or golden handshake 55an employee s invalidity payment for permanent disability, (other than compensation for personal injury) and certain payments after the death of an employee. ETPs do not include: 55a payment for unused annual leave or unused long service leave 55the tax-free part of a genuine redundancy payment or an early retirement scheme payment. ETP tax rate The tax rates on ETPs vary depending on the nature of the payment and the age of the recipient. For the latest tax table for employment termination payments, go to ato.gov.au/businesses. 16. Tax-free part of genuine redundancy payments and early retirement scheme payments This is the limit set for genuine redundancy and early retirement scheme payments. The base limit and service amounts are indexed in line with AWOTE each income year. For each complete Financial year Base limit year of service $9,780 $4, $9,936 $4,969 To encourage you to use superannuation to save for retirement, the government gives super certain tax benefits 17. Tax offset The fund receives a tax offset for insurance premiums paid by members, which is credited to the accounts of the members who paid those premiums. The benefit of any tax deductions the fund may receive in respect of the administration fee and costs paid by members is not passed on as a reduced fee or cost, but is retained in the fund for the benefit of the membership as a whole. 18. Spouse tax offset If your spouse earns less than $13,800 a year (including reportable fringe benefits) and you make spouse contributions for them, you may be eligible for a tax offset of up to $540 a year. The amount of spouse contributions is unlimited, but the maximum offset amount is 18% of $3,000 (i.e. $540). The rebate is reduced if your spouse earns over $10,800 and phases out completely when your spouse s income reaches $13,800 a year. You can claim the offset on your tax return for the year in which the contribution is made. The after-tax contribution cap applies to the receiving spouse. 5 firststatesuper.com.au Call enquiries@firststatesuper.com.au

6 19. Tax deduction for self-employed contributions If you are self-employed or substantially self-employed, you may be able to claim a full income tax deduction for personal contributions you make to your super until you turn 75 or if the contributions are made before the 8th day after reaching age 75. Self-employed means you work as a sole trader or a partner in a partnership, and substantially self-employed means you earn less than 10% of your total income from employment. If you wish to claim a tax deduction for personal contributions, you must complete and lodge a Notice of intent to claim or vary a deduction for personal super contributions form with us and receive an acknowledgment. This form is available at firststatesuper.com.au/forms. You must lodge your notice of intent before the earlier of the: 55day you lodge your income tax return for the year in which you made the contribution 55end of the income year following the year in which you made the contribution. Personal contributions that have been claimed as a tax deduction are subject to a 15%* contributions tax and will count towards your concessional (before-tax) contributions cap. If you intend to transfer your super benefit to start up an income stream with us, or you are transferring or withdrawing your full benefit from the Fund, you should ensure that you lodge a notice of intent before the transfer, otherwise you will not be able to claim a tax deduction on your contributions. If you make a partial withdrawal or transfer during the year, a deduction cannot be given for all the personal contributions made during the year. It will be limited to a proportion of the tax-free component of the super account that remains after the rollover or withdrawal. The Notice of intent to claim or vary a deduction for personal super contributions form has more information. * Generally, if your income plus your before-tax super contributions are greater than $300,000, you ll need to pay an additional 15% tax on the contributions over $300, Tax deduction for employer contributions Employers can claim a tax deduction for contributions made to a complying fund on behalf of an employee under the age of 75 or mandated employer contributions. We re here to help! Super can be quite complicated and sometimes you just want to know that you re making the right decisions. Because the right decisions about your super can make a real difference to your financial future. So if you ve got any questions, or you just want the comfort of knowing you re on the right track, why not give us a call? We can answer simple questions over the phone, or if your situation is more complex, we can prepare a full financial plan. It s all up to you, no obligation, just call Financial planning advice is provided by First State Super Financial Services Pty Ltd ABN , AFSL For more information about your First State Super account and how we manage your super visit our website: firststatesuper.com.au Service and advice Phone This is general information only and does not take into account your Fax specific objectives, financial situation or needs. You should consider the Member Booklet (Product Disclosure Statement) for the product enquiries@firststatesuper.com.au you hold or intend holding before making any decisions. Call us on for a copy, free of charge, or visit firststatesuper.com.au. Web firststatesuper.com.au FSS Trustee Corporation (FTC) ABN , AFSL 93340, the Post PO Box 19 trustee of the First State Superannuation Scheme (First State Super) ABN Wollongong NSW 500 Module 3.13 Managing Super taxes, caps, payments, thresholds and rebates 6 M3.13_SUPERTAXETC_05/16