Taxation Supplement 14 March 2014 Contents Tax on contributions 2 Tax on rollovers 3 Tax on investment earnings 3 Tax on super benefits 3 Spouse tax offset 7 Tax deductions for the self-employed 7 Low income super contribution 7 Reliance Super a membership category of Maritime Super The information in this Supplement forms part of the Reliance Super Product Disclosure Statement (PDS) dated 14 March 2014 This Supplement provides you with important information about the taxation of super. You should read the important information in the PDS, this Supplement and the other Supplements before you make a decision about Reliance Super. The information in this Supplement may change from time to time. Updated information will be posted on our website. Where the change is material, an updated version will replace the relevant part of this Supplement. A copy of the most recent PDS or of the most recent version of this or any other Supplement is available free of charge on the Maritime Super website at www.maritimesuper.com.au or by calling Member Services on 1800 757 607. We will provide you with a copy free of charge within eight business days of your request. This Supplement is only available to persons receiving it in Australia (including electronically). Terms Where we refer to the Fund in this Supplement, we mean Maritime Super. Where we refer to the Trustee or we, us or our in this Supplement, we mean the Trustee of Maritime Super, Maritime Super Pty Limited. Contact Member Services Toll free: 1800 757 607 Monday to Friday 8.30am - 5.30pm (AEST) Website: www.maritimesuper.com.au Email: info@maritimesuper.com.au Other Supplements are available from the Maritime Super website at www.maritimesuper.com.au>publications>product Disclosure Statements or by calling Member Services for a hardcopy. Issued by Maritime Super Pty Limited (the Trustee) ABN 43 058 013 773 AFSL No. 348197 RSE Licence No. L0000932 Maritime Super (the Fund) ABN 77 455 663 441 RSE Registration No. R1001747 MySuper Authorisation No. 77455663441220 1 Taxation Supplement Maritime Super Division Reliance Super (a membership category of Maritime Super) 14 March 2014
Tax on contributions Your super may be taxed at three stages: 1. when contributions are made to super 2. when investments in super earn income; and 3. when you receive your benefits. Employer contributions Employer (including salary sacrifice) contributions are subject to a contributions tax at 15%. If you are a very high income earner, these contributions will be subject to an additional 15% tax. If you exceed the concessional contributions cap, the effective total rate of tax may be higher. Concessional contributions of very high income earners Very high income earners may pay an additional tax at 15% on concessional contributions up to their concessional contributions cap (to learn more, refer to the About your membership Supplement for your membership category). Concessional contributions include employer (including salary sacrifice) contributions, after-tax deductible contributions by the self-employed and notionally taxed amounts or employer subsidy for any administration fee and insurance premiums paid by your employer. A very high income earner, for the purposes of this measure, is an individual whose income is greater than $300,000. Income includes concessional contributions (mentioned above), an individual s taxable income, reportable fringe benefits and total net investment loss. Where an individual s income, excluding their concessional contributions, is less than the $300,000 threshold but the inclusion of their concessional contributions pushes their income over the threshold, the additional 15% tax will only apply to those concessional contributions that are in excess of the threshold. Former temporary residents who receive a departing Australia superannuation payment (DASP), however, are entitled to a refund of any additional 15% tax they have paid. How to pay the additional 15% tax If liable, the Australian Taxation Office (ATO) will issue you with an assessment for the 15% additional tax on your concessional contributions (mentioned above) and a Release Authority. You can pay the amount directly to the ATO and/or you can send the Release Authority to one of your super funds. Payment must be made within 21 days after the notice of assessment is issued to you. Amounts that remain unpaid after this date are subject to the general interest charge. Deductions for insurance premiums The Trustee is entitled to a tax deduction for certain death and disability insurance premiums, and passes the benefit of this deduction on to members. Contributions that exceed the contributions cap There are limits (caps) on the amount of contributions that can be made without incurring unfavourable tax treatment. Contributions in excess of these caps incur an additional tax, which may be at your marginal tax rate* or more (inclusive of contributions tax, where applicable). It is up to you to monitor the total amount of contributions that are made for you to super in any financial year as the caps generally apply to all contributions made by you (or on your behalf) to all of your super funds. * Includes the Medicare levy. Excess tax on concessional contributions Concessional contributions in excess of the concessional contributions cap are included as assessable income and taxed at your marginal tax rate plus an additional charge. You will also be entitled to a 15% offset for the contributions tax paid on the excess concessional contributions. For the current concessional contributions cap and an explanation of concessional contributions, visit the ATO s website at www.ato.gov.au. Payment of tax and refund opportunity The ATO will issue you with an assessment which determines the amount of excess contributions that will be included in your assessable income and taxed at your marginal tax rate (plus the amount of the additional charge). You can elect to be refunded up to 85% of your excess concessional contributions for a financial year from your super. If you wish to make this election, you must advise the ATO within 21 days of receiving the assessment. The contributions will then be paid by your super fund to the ATO, who will then refund to you any amount in excess of your income tax liabilities. 2 Taxation Supplement Maritime Super Division Reliance Super (a membership category of Maritime Super) 14 March 2014
Excess tax on non-concessional contributions Contributions in excess of the non-concessional contributions cap are subject to tax at an overall rate of at least 46.5% (increasing to 47% from 2014/15). Note that any excess concessional contributions (other than the gross amount* of any refunded in a year) also count towards the nonconcessional contributions cap. Consequently, if you reach your non-concessional contributions cap and you then exceed your concessional contributions cap, the excess concessional contributions (not refunded) will be taxed twice. For the current non-concessional contributions cap and an explanation of non-concessional contributions, visit the ATO s website at www.ato.gov.au. * Inclusive of 15% contributions tax. Payment of tax The ATO will issue you with an assessment for the additional tax together with a Release Authority. The additional tax can only be paid from one of your super accounts. You must provide the Release Authority to one of your funds within 21 days of its issue date. Your fund will pay the tax on your behalf and will generally deduct the amount from your benefit. No-TFN tax If Maritime Super does not hold your tax file number (TFN), you will be charged no-tfn tax at 31.5%* on your employer contributions (including salary sacrifice and employer subsidy) and any after-tax contributions made by you that you will claim as a tax deduction. This tax is in addition to the 15% tax on contributions and certain rollovers. If you joined the Stevedoring Employees Retirement Fund (SERF) before 1 July 2007 and these contributions are $1,000 or less for the applicable financial year, this no-tfn tax may not be payable. You may be able to apply to the Trustee for a refund of any no-tfn tax charged if you supply your TFN to Maritime Super within the following three financial years of no-tfn tax being withheld. * Increases to 32% from 2014/15. After-tax deductible contributions by the self-employed A 15% contributions tax applies to contributions made by a self-employed or substantially self-employed person who has notified Maritime Super that they will be claiming a tax deduction for those contributions. If you are a very high income earner, these contributions will be subject to an additional 15% tax. If you exceed the concessional contributions cap, the effective total rate of tax may be higher. Tax on rollovers into super In general, there is no tax when you transfer benefits from one Australian super fund to another. However, the taxable component that you roll over or transfer from an untaxed super source (e.g. a rollover from an unfunded government super scheme) will be taxed at 15%. Tax at the rate of 46.5%* will apply to untaxed amounts over $1.315 million for 2013/14, subject to indexation, rolled over from an untaxed super source withheld by the transferor fund. * Increases to 47% from 2014/15. Tax on investment earnings Any investment earnings on your super are taxed at a maximum rate of 15%. However, the actual rate at which the Fund pays tax may be reduced below 15% due to the effect of various tax discounts, credits and offsets. Tax on investment earnings is deducted from the daily unit prices (or interest rate) before earnings are allocated to your account. Tax on super benefits If you wish to withdraw all or part of your benefit, the tax you pay will depend on factors including: your age at the time of withdrawal the tax components of your benefit whether Maritime Super has your tax file number whether you are an Australian resident the circumstances under which your benefit is withdrawn (e.g. concessions are afforded to the disabled); and the form of your benefit: lump sum or as an income stream. If you are under 60 and qualify for a benefit, call Member Services to request a benefit quotation which will include an estimate of the amount of tax payable before withdrawing benefits. A licensed financial planner can also help you calculate the tax on your benefit. Reliance Super (a membership category of Maritime Super) Taxation Supplement 3
If Maritime Super does not have your tax file number and you are under 60, we may be required to withhold tax at the highest marginal income tax rate plus the Medicare levy from the taxable component of any benefits withdrawn Tax components Your benefit may consist of both taxable and tax-free components. All payments will consist of taxable and tax-free components in the same proportion as the components of your total benefit. You cannot elect to withdraw specific components of your benefit. Tax-free component Your tax-free component consists of any crystallised segment at 30 June 2007 and a contribution segment (which is generally the total of all contributions made since 1 July 2007 that are not taxable within a super fund, including after-tax contributions made by you that you will not claim or have not claimed as a tax deduction, spouse contributions, the Government co-contribution and low income super contribution). The tax-free component of your benefit will not be taxed when it is paid to you as a lump sum or as an income stream. Taxable component The taxable component comprises the remainder of your benefit, including any former post-june 1983 component and employer (including salary sacrifice) contributions. The tax you pay on the taxable component will depend on your circumstances, including your age and whether your benefit is paid as a lump sum or as an income stream. Death benefits Paid as a lump sum If you die while a Maritime Super member, your death benefit will generally be paid to your dependants or to your legal personal representative (for inclusion in your estate). The tax payable will depend on whether your death benefit is paid to a tax dependant or a non-tax dependant. The table below shows how your lump sum death benefit would be taxed. Who paid to? Tax-free component Taxable component Tax dependant Tax free Tax free Non-tax dependant* Tax free Taxed element: 15% plus Medicare levy + Untaxed element^: 30% plus Medicare levy + Estate Paid tax-free to the estate The legal personal representative of the estate must withhold tax if the benefit is paid to a non-tax dependant * Additional tax may be payable if the beneficiary does not provide their tax file number. + The Medicare levy is 1.5%, increasing to 2% from 2014/15. ^ An untaxed element may be payable where an insured benefit has been provided through the Fund in respect of the deceased member. An additional amount to compensate for contributions tax paid on taxable contributions may also be added if your Death benefit is paid to your spouse, former spouse or child (including an adult child, the child of a de facto partner and a child from a same-sex relationship) or to your estate if passed onto these eligible dependants. A tax dependant includes: your spouse or former spouse (including an opposite- or same-sex de facto or former de facto partner) your child under the age of 18 (including step-children, adopted children, children of a same-sex relationship, children of an opposite- or same-sex de facto partner, ex-nuptial children, IVF children and children from certain surrogacy arrangements) anyone financially dependent on you at the time of your death; and anyone with whom you shared an interdependency relationship at the time of your death. A non-tax dependant is a person who is not a tax dependant and includes a child aged 18 or over (unless he/she is financially dependent on you). 4 Taxation Supplement Maritime Super Division Reliance Super (a membership category of Maritime Super) 14 March 2014
Paid as a pension The taxation of a death benefit paid as a pension depends on the age of both the deceased member and the benefit recipient. The table below shows how a deceased member s death benefit would be taxed if paid as a pension. Age of deceased member Age of benefit recipient Taxable component Tax-free component Age 60 and above Any age Tax free Tax free Below age 60 Age 60 and above Tax free Tax free Below age 60 Below age 60 Taxed element marginal income tax rate of the beneficiary plus the Medicare levy* Tax free The beneficiary is entitled to a 15% tax offset on the taxable component * The Medicare levy is 1.5%, increasing to 2% from 2014/15. Death benefits can only be paid as a pension to a dependant, and in the case of a child aged 18 years or over, only if the child is financially dependent on you and not yet 25 or if the child suffers a disability (as defined by legislation). Once the child reaches age 25, the pension must stop and the benefit commuted and paid as a lump sum, unless the child suffers a disability. Terminally ill members If you are diagnosed with a terminal illness, any lump sum benefit paid to you may be tax free. You may qualify for this tax concession if two registered medical practitioners (at least one of whom is a specialist practising in an area related to your illness or injury) certify that, due to your illness or injury, they do not expect you to live beyond 12 months. Permanently incapacitated members If you are aged 60 years or over and permanently incapacitated, any lump sum benefit paid to you is tax free. If you are under age 60 and permanently incapacitated, you may be eligible for an additional tax-free component. The adjusted tax-free component is only payable where two legally qualified medical practitioners have certified that, because of your ill-health (whether physical or mental), it is unlikely you will ever be gainfully employed in a capacity for which you are reasonably qualified by education, experience or training. Tax at the rates for other lump sum payments will apply to the taxable component. Lump sum benefits under $200 Your benefit will be paid to you tax free if your total benefit is less than $200 and is paid to you: following termination of employment with one of Maritime Super s participating employers or standard employer sponsors; or once we locate you if you were previously a lost member. Temporary residents who have permanently left Australia If you are a foreign national who held a temporary visa and you have left Australia permanently or you claim back any unclaimed super paid to the ATO on the same basis, higher tax rates will apply to your lump sum benefit payment when it is paid out to you. Reliance Super (a membership category of Maritime Super) Taxation Supplement 5
Other lump sum payments Aged 60 or over If you are aged 60 or over, there is no tax payable on your benefit. Aged under 60 If you are under age 60, the tax on your lump sum benefit payment depends on your age. The table below is a summary of the current tax treatment of lump sum withdrawals. Age Tax-free component Taxable component^ Preservation age* to 59 Tax free Tax-free up to low rate cap amount ($180,000 for 2013/14, subject to indexation) Balance: maximum 15% plus the Medicare levy + Under preservation age* Tax free Maximum 20% on whole amount plus the Medicare levy + * Preservation age is 55 (or higher for those born after 30 June 1960 refer to Preservation age in the About your membership Supplement for Reliance Super). + The Medicare levy is 1.5%, increasing to 2% from 2014/15. ^ Additional tax may be payable where your tax file number has not been provided. Tax on Income Protection benefits Any Income Protection benefit you receive will be taxed at your marginal income tax rate (regardless of your age). Updated income tax rates are available on the ATO website at www.ato.gov.au. Pension payments Aged 60 or over If you are aged 60 or over, there is no tax payable on your pension payments. Aged under 60 If you are aged under 60, tax is payable on the taxable component of your pension payments. There is no tax payable on the tax-free component of your pension payments. A 15% tax offset applies to the taxable component when you reach your preservation age*. The table below is a summary of the current tax treatment of a pension if you are aged under 60 years. Age Tax-free component Taxable component^ Preservation age* to 59 Tax free Your marginal income tax rate plus the Medicare levy + You are eligible for a 15% tax offset (rebate) Under preservation age* Tax free Your marginal income tax rate plus the Medicare levy + * Preservation age is 55 (or higher for those born after 30 June 1960). A 15% tax offset (rebate) may also apply if your pension payment is a disability super benefit as defined by legislation ^ Additional tax may be payable where your tax file number has not been provided on a Tax File Number Declaration form. + The Medicare levy is 1.5%, increasing to 2% from 2014/15. 6 Taxation Supplement Maritime Super Division Reliance Super (a membership category of Maritime Super) 14 March 2014
Tax file number When you start a pension before age 60, or receive Income Protection benefits, you should consider advising Maritime Super of your tax file number on an ATO Tax File Number Declaration form, even if you have previously provided your tax file number. This is because we need to know your entitlement and intentions in relation to the tax-free threshold and offsets described on this form. The form is available by calling Member Services or by visiting the ATO s website at www.ato.gov.au. Non-residents If you are a non-resident for tax purposes, you do not pay the Medicare levy but may also not be able to claim the tax-free threshold and some tax offsets applicable to income stream payments. Spouse tax offset Your spouse may be able to claim an 18% tax offset on contributions of up to $3,000 made in a financial year to your account if you are a low-income earner or non-working spouse (including an opposite- or same-sex de facto partner). The maximum offset is $540. The maximum contribution eligible for the tax offset reduces by $1 for each dollar your income, reportable employer super contributions and total reportable fringe benefits exceed $10,800, and the offset reduces to zero if those items total $13,800 or more. Tax deductions for the self-employed Self-employed and substantially self-employed persons (i.e. those who earn less than 10% of their income including reportable fringe benefits and reportable employer super contributions from employment) under the age of 75 may be eligible for a tax deduction for after-tax contributions made by them to a super fund. Self-employed members who wish to claim a tax deduction for after-tax contributions made by them must notify Maritime Super of their intention to claim a tax deduction before the earlier of: the date they lodge their income tax return the end of the following financial year the date the contribution is withdrawn from the Fund or taken in the form of a pension; and the date they lodge an application with the Trustee to split the contributions in favour of their spouse. Once a notice of intention to claim a tax deduction is lodged, taxation legislation restricts when the notice can be withdrawn or the amount advised adjusted. Call Member Services for more information or for a copy of the form you will need to complete. Your spouse is not entitled to this offset in certain circumstances, including if they are living separately and apart from you on a permanent basis. Reliance Super (a membership category of Maritime Super) Taxation Supplement 7
Low income super contribution A low income super contribution is available to lowincome earners for concessional contributions made to super from 1 July 2012. The concession is a 15% offset of the contributions tax paid on concessional contributions for a member with an adjusted taxable income of up to $37,000 (not indexed), with an annual maximum amount payable of $500 (not indexed). To obtain the maximum $500 tax rebate, your employer and before-tax (salary sacrifice) contributions will need to be at least $3,333 for the year. To be eligible for the low income super contribution, you must: have a total adjusted taxable income* that is less than $37,000 pa (not indexed) have concessional contributions made to your super during the financial year earn 10% or more of your total income as an employee or from carrying on a business (or a combination of both); and not hold a temporary visa at any time during the financial year (unless you were at all times a New Zealand citizen or the holder of a prescribed visa ). The ATO determines the amount of the low income super contribution you are entitled to once it has received your income tax return and your super funds have lodged information about your concessional contributions. Where the ATO has insufficient information to determine whether you qualify for the low income super contribution, the ATO may estimate the amount of the low income super contribution payable at the end of the following financial year. The ATO will generally pay the low income super contribution to the super account where your concessional contributions were made (unless you advise otherwise). * Your adjusted taxable income is net of deductible child maintenance expenditure and includes your taxable income, adjusted fringe benefits, target foreign income, any net investment loss, tax-free pensions and benefits plus reportable employer superannuation contributions. Toll Free 1800 757 607 8.30am - 5.30pm AEST Email info@maritimesuper.com.au Website www.maritimesuper.com.au Fax 02 9261 3683 Visit us at Sydney Level 16, 31 Market Street Sydney NSW 2000 OR Melbourne Level 4, 6 Riverside Quay Southbank VIC 3006 8 Taxation Supplement Maritime Super Division Reliance Super (a membership category of Maritime Super) 14 March 2014