How super is taxed. About this document. Tax on concessional contributions. Concessional contribution tax rates from 1 July 2015:

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1 How super is taxed Date of issue: 1 July 2015 mtaasuper.com.audate Phone: 1300December Fax: of issue: The information in this document forms part of the Product Disclosure Statement for MTAA Super dated 1 July 2015 issued by Motor Trades Association of Australia Superannuation Fund Pty Ltd (ABN , AFSL ) of Level 3, 39 Brisbane Avenue Barton ACT 2600, the Trustee of the MTAA Superannuation Fund (ABN ). About this document There are two types of super contributions concessional and non-concessional. This document provides a general summary of the taxation rules that apply to superannuation contributions, benefits, insurance benefits and investment earnings. Your personal circumstances determine the way tax affects you, so MTAA Super recommends that you obtain professional advice in relation to tax matters. Tax on concessional contributions The contributions your employer makes for you as Superannuation Guarantee (SG) contributions, or salary-sacrifice contributions, or both, are concessional contributions. There is a limit to the amount of concessional contributions that can be made by you (if eligible), or on your behalf, before you pay extra tax. For the 2015/16 financial, year, the maximum amount of concessional contributions that can be made by you, or on your behalf, before you pay extra tax is $30,000 (or $35,000 if you are aged 49 years or over on 30 June 2015). These limits apply per member, not per fund. This means that contributions made to your other funds are included in the limit and additional tax will apply to contributions in excess of the limit. Concessional contribution tax rates from 1 July 2015: Income for concessional contribution tax rate purposes Tax rate Less than $300,000 15% $300,000 or greater 30%* * 15% tax is deducted by the Fund and the ATO will issue a personal assessment to the member for the additional 15%. This additional tax is imposed on high income earners whose income and relevant concessionally taxed superannuation contributions (referred to as low tax contributions) exceed $300,000 for an income year. A member s income for the purposes of the high income earner s tax broadly includes taxable income, reportable fringe benefits and total net investment losses. A member s low tax contributions generally include employer and member (before tax) contributions. A member s low tax contributions do not include non-concessional contributions or excess concessional contributions. For high income earners, the additional 15% tax will be applied to the lower of: the member s low tax contributions; and The sum of the individual s income for the purposes of the high income earner s tax and low tax contributions above the $300,000 threshold. WARNING: You will pay an additional tax on concessional contributions if you do not supply your tax file number to the Fund.

2 Your total concessional contributions for a financial year only include the concessional contributions received by the Fund or any other fund, during that financial year. If you or your employer make a concessional contribution towards the end of the financial year, you will need to ensure that the Fund receives the contribution before the end of the financial year. Otherwise, you may unintentionally exceed your concessional contributions limit in the following financial year and incur additional tax on these excess concessional contributions. Any concessional contributions that exceed the limits outlined above, will count towards your non-concessional contributions limit if you do not elect to withdraw the excess amount from MTAA Super. See the How Super Works document at mtaasuper.com.au/memberpds/howsuperworks for more information on contributions. WARNING: You will pay your marginal rate of tax plus an interest component on contributions in excess of the contribution limits instead of the concessional rate of 15% (or 30% if your income is more than $300,000 per year). Tax on non-concessional contributions No contributions tax is payable on non-concessional contributions, which include personal after-tax contributions and spouse contributions. No contribution tax is payable on a super co-contribution. There are limits to the amount of non-concessional contributions you can make before you pay extra tax each financial year: a maximum of $180,000 each financial year or a maximum of $540,000 over a three-year financial period if you are under age 65. These limits apply per member, not per fund. This means that contributions made to other funds are included in the limits and additional tax will apply to contributions in excess of the limits. These limits do not include the super co-contribution. Please note that non-concessional contributions cannot be accepted if MTAA Super does not have your tax file number. It is important to note that if you will be making a non-concessional contribution towards the end of the financial year, you will need to ensure that the Fund receives the contribution by the end of the financial year. Otherwise, you may unintentionally exceed your non-concessional contributions limit in the following financial year (or the three-year financial period) and incur additional tax on these excess non concessional contributions. 2

3 Personal tax-deductible contributions If less than 10 per cent of your total income (including reportable fringe benefits and reportable employer super contributions) is earned as an employee for example, you are self-employed and you are aged less than 75 years, you could qualify to make additional contributions that are tax deductible. The concessionally taxed treatment of these contributions is subject to the limit that applies to concessional contributions. You must submit a notice of intention to claim a tax deduction (a deduction notice) to the Fund before the day you lodge your tax return, or before the end of the financial year following the year in which the contribution was made, whichever comes first. The Fund must acknowledge receipt of your deduction notice in order for you to claim the tax deduction. A trustee can refuse to acknowledge a deduction notice in certain circumstances. If we do not have your TFN, you may be paying more tax than you need to. You must also ensure that the Fund has acknowledged receipt of your deduction notice before you withdraw or roll-over your benefits (in whole or in part) or commence a pension. Otherwise, you may not be able to claim a tax deduction for your contribution or, in the case of partial withdrawal or roll-over, you may only be able to claim a tax deduction for a proportion of your contribution. A Deduction for personal super contributions form is available on the MTAA Super website, mtaasuper.com.au. Low Income Superannuation Contribution From 1 July 2012 until 30 June 2017, if your adjusted taxable income is less than $37,000 per annum, the Government will make a payment of up to $500 regardless of whether or not a personal contribution has been made. The payment amount will be 15% of concessional contributions you or your employer makes and will be made directly into your superannuation account in the following year. The Low Income Superannuation Contribution (LISC) will not be payable in respect of concessional contributions made for the financial year and the Australian Taxation Office will not make any further determinations of LISC amounts after 30 June An important note about your tax file number It is very important that you provide your tax file number (TFN) to MTAA Super before your employer makes any contributions on your behalf. Since 1 July 2007, it has been a requirement that all employers provide TFNs for all registered employees. If we do not have your TFN, you may be paying more tax than you need to. If MTAA Super does not have your tax file number: we cannot accept non-concessional contributions from you any concessional contributions made on your behalf will be charged an additional tax of 30 per cent plus applicable levies on top of the 15 per cent contributions tax payable by the Fund when a benefit is paid, tax may be deducted at the top marginal tax rate of 45 per cent plus applicable levies. MTAA Super is authorised to collect your tax file number under the Superannuation Industry (Supervision) Act We are required by law to properly safeguard it and to use it only for approved, legislated purposes. These include: amalgamating superannuation benefits in the Fund with your consent as required advising the Australian Taxation Office (ATO) of contributions, as required by taxation laws passing your TFN on to another regulated fund or retirement savings account if your benefit is transferred or rolled over, unless you request in writing that this not be done advising the ATO through the Lost Members Register advising the ATO if we are paying an unclaimed benefit to the ATO in respect of members aged 65 or more or former temporary residents. 3

4 You do not have to provide your tax file number to MTAA Super but, as mentioned, there may be consequences if you do not, such as paying additional tax on your contributions or benefits. The purposes for which the Fund may use your tax file number and the consequences of not providing it could change as a result of future legislation. Temporary residents If you have been working in Australia on a temporary resident s visa and your visa has expired, you may be able to claim your superannuation when you leave Australia. This type of payment is known as a departing Australia superannuation payment, or DASP. The tax rates payable on a DASP are as follows: tax-free component nil taxable component 38 per cent but possibly higher if the Fund does not have your tax file number. For more information about claiming a DASP and the tax payable on such a payment, call the Australian Taxation Office on Tax on investment earnings The investments of superannuation funds are subject to a maximum tax rate of 15 per cent of net earnings after fees and other related costs. Tax on benefits TAX PAYABLE ON THE TAXED ELEMENT OF YOUR BENEFIT Age and status Age 60 or over Preservation age (generally age 55 to age 59) Less than preservation age Component and tax treatment Tax free Tax-free component 1 is tax free. Taxable component 2 The first $195,000 3 is tax free. The amount above $195,000 is taxed at 15% plus the applicable levies. Tax-free component 1 is tax free. Taxable component 2 is taxed at 20% plus the applicable levies. 1 The tax-free component consists of amounts such as the accumulation of non-concessional contributions, pre-1983 components and invalidity components. If you would like more information about these components contact the Fund on The taxable component consists of the balance after subtracting the tax-free component. It generally comprises amounts such as the accumulation of concessional contributions and the post-1983 component. If you would like more information about these components contact the Fund on The $195,000 benefit limit is indexed in line with Average Weekly Ordinary Time Earnings (AWOTE) each year in $5,000 increments. This limit applies to all benefits received from any complying superannuation fund. If your benefit includes an untaxed element (such as insurance proceeds), a higher rate of tax may be applicable. 4

5 Tax on insurance benefits MTAA Super s insurance cover is provided as a benefit through a superannuation fund, so for taxation purposes any insurance benefits are treated as superannuation death or disability benefits. The tax payable on total and permanent disability benefits varies according to your age, your length of service and the amount you are entitled to. MTAA Super will provide details of the tax payable should you become entitled to such a benefit. Income protection benefits must generally be included in your assessable income. You should always seek professional advice about taxation of your benefits in relation to your own personal circumstances. LUMP SUM DEATH BENEFITS PAID FROM MTAA SUPER Paid to dependant Paid to non-dependant Paid to estate Tax free Tax-free component is tax free. Taxable component is taxed at 15% plus the applicable levies. Untaxed component for example, insurance proceeds is taxed at 30% plus the applicable levies. Paid tax free to estate initially, then legal personal representative must determine whether benefit is paid to a dependant or a non-dependant and withhold tax accordingly if applicable. Note: A dependant for tax purposes is a spouse (including a de facto or same sex partner), a child under 18 or any other person who was dependent or interdependent on the deceased member. It does not include an adult child aged 18 or more unless the child was also a financial dependent of the deceased member as at the date of death. This definition of dependant differs from the definition that applies to a trustee s determination about the distribution of death benefits see the How Super Works document on the website at mtaasuper.com.au/memberpds/ howsuperworks or call us on to request a copy of the document. 5

6 Anti-detriment payment An anti-detriment payment is a lump-sum amount that is paid in addition to the account balance of a deceased member, if the benefit is being paid out as a lump sum. It represents a refund of contributions tax levied against the deceased member s superannuation entitlements during their lifetime. The payment is made only if the recipient of the lump-sum benefit is a spouse (including a de facto or same sex partner), an ex-spouse or a child (including an adult child) of the deceased member, and is included in the taxable component of the lump sum. Need more information? You should always seek professional advice about the taxation of your benefits in relation to your own personal circumstances. We recommend that you read the How Super Works document for more information. This is available on the website at mtaasuper.com.au/memberpds/howsuperworks or call us on to request a copy of the document. For more information about taxation of superannuation benefits call the Australian Taxation Office on The information provided in this guide is general only and does not take into account your personal financial situation or needs.you should therefore consider obtaining financial advice that is tailored to your personal circumstances from a licensed financial adviser /15