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Section 7. How super is taxed

The information in this document forms part of the Hostplus Superannuation Fund and Hostplus Personal Super Plan Product Disclosure Statement 27 September 2016.

Here's a brief summary of how your super is taxed. It's quite different to the income tax you're used to and can be complex. So we recommend that you seek independent, professional taxation advice or contact the ATO for more help with any super tax questions you may have.

Please select a section

7.1 Tax File Numbers

While it is not an offence to decline to quote your Tax File Number (TFN), it is in your interest to give Hostplus your TFN when you join. Generally there are significant consequences if your TFN is not quoted or incorrectly quoted when contributions are made for you, such as:

  • an additional tax of 30% (plus Medicare levy and the temporary 2% Budget Repair levy) is imposed on ‘No TFN’ contributions paid into the fund on your behalf, in addition to 15% tax on employer contributions,
  • we cannot accept your personal contributions, and
  • Government co-contributions are not payable.

The additional tax will be deducted:

  • for contributions – each year as at 30 June or upon the member exiting Hostplus.
  • for benefits – upon payment of a benefit.

If you do not have a TFN contact the ATO ato.gov.au on 13 28 61.

SuperMatch

If you have provided consent to the fund, we will periodically access the ATO system (SuperMatch) on your behalf to inform you about your superannuation interests, assist you to manage your superannuation interests as reported to the ATO and reunite you with lost super or monies held on your behalf by the ATO.

The ATO will use your TFN as the primary identifier in matching your lost super or multiple accounts.

You can provide your TFN and SuperMatch consent to Hostplus at hostplus.com.au.


7.2 Claiming your No TFN contributions tax

You may claim the additional tax paid on No TFN contributions (the additional 30% plus Medicare levy and from 1 July 2014 the temporary 2% Budget Repair levy) if you quote your TFN to Hostplus within three years from the end of the financial year that the additional tax for the No TFN contributions were payable.

If you quote your TFN to Hostplus:

  • before 30 June, the additional tax will be credited to your account as at 30 June that year
  • after 30 June, the additional tax will be credited as at 30 June the following year.

Example

Sam did not provide his TFN to the trustee before 30 June 2016. The trustee deducted the additional No TFN tax (30% plus Medicare levy instead of 15%) out of Sam’s account at 30 June 2016. On 20 July 2016, Sam quotes his TFN to the trustee. The trustee will credit the additional tax deducted on 30 June 2016 to Sam’s account on 30 June 2017.


7.3 Taxation of contributions

Concessional contributions*

Concessional contributions (including employer and self-employed contributions) are taxed at 15% on amounts up to the $30,000 a year cap and $35,000 a year cap for those aged 49 or over on 30 June 2016.

Amounts over the concessional contributions cap will be taxed at the individual’s marginal tax rate, plus an interest charge to recognise that tax on excess contributions is collected later than normal income tax.

You will be entitled to a non-refundable tax-offset equal to 15% to account for the contributions tax that has already been paid in respect of your excess concessional contributions.

Alternatively, you may elect to withdraw up to 85% of your excess concessional contributions from the fund to help pay your income tax assessment when you have excess concessional contributions. Any excess concessional contributions withdrawn from Hostplus will no longer count towards your non-concessional contributions cap.

If you earn income more than $300,000, you will pay an additional tax of 15% (i.e. 30% tax) on those concessional contributions exceeding the $300,000 threshold. The definition of ‘income’ for the purpose of this measure includes taxable income, reportable fringe benefits, total net investment losses, target foreign income, tax free government pensions and benefits and concessional contributions up to the cap. This does not apply to excess contributions that have been subject to excess contributions tax. Accordingly, the ATO requires information on an individual’s income tax return and member contribution details in order to make an assessment of this tax.

 

*Note proposed change:
At the May 2016 Budget Announcements, the Federal Government flagged that it would require those with combined incomes and superannuation contributions greater than $250,000 to pay 30% tax on their concessional contributions, up from 15%. This extends the current treatment of people with combined incomes and superannuation contributions over $300,000. It also flagged that it would lower the superannuation concessional contributions cap to $25,000 per annum. The Government will introduce catch-up concessional superannuation contributions by allowing unused concessional contributions caps to be carried forward on a rolling basis for up to five years for those with account balances of $500,000 or less. These changes have been proposed but are not yet law

Non-concessional contributions*

For non-concessional contributions, Hostplus is unable to accept contributions over the non-concessional contributions cap of $180,000. However, if Hostplus does inadvertently receive non-concessional contributions over the non-concessional cap, excess non-concessional contributions will be taxed at 45% (plus Medicare levy and the temporary 2% budget repair levy).

The excess contributions tax will not be imposed on excess non-concessional contributions if you elect to release excess non-concessional contributions and 85% of associated earnings arising from those contributions, after receiving a written determination from the Commissioner of Taxation. Excess non-concessional contributions tax will be imposed on any excess non-concessional contributions that remain with the fund.

The full associated earnings amount will be included in your assessable income in the year the excess non-concessional contribution arose and will be taxed at your marginal tax rate. You will be entitled to a non-refundable tax-offset equal to 15% of the associated earnings amount that is included in your assessable income.

If you are under 65 years of age, you can contribute up to $540,000 tax free over a three year period. However, any more contributions made in that three year period in excess of the cap will be taxed at 45% (plus Medicare levy and the temporary 2% Budget Repair levy).

No contributions tax is payable on:

  • personal contributions (or non-concessional contributions) for which you do not claim a tax deduction,
  • spouse contributions,
  • amounts transferred or rolled into Hostplus from other superannuation funds (except where it includes a post 30 June 1983 untaxed component such as a ‘golden handshake’), and
  • Government co-contributions.

*Note Proposed Changes:
At the May 2016 Budget Announcements, the Federal Government flagged that it would introduce a $500,000 lifetime cap for non-concessional contributions. The proposed changes will apply retrospectively from May 2007. This change has been proposed but is not yet law.

See Section 2: How super works - Understanding contributions

Superannuation contributions surcharge assessments issued by the ATO ato.gov.au will still apply for contributions paid for previous financial years if the surcharge has not previously been paid.


7.4 Tax deduction for personal super contributions

If you are self-employed or substantially self-employed (i.e. you earn less than 10% of your income, including assessable income and fringe benefits from an employer) you can claim a tax deduction. 

Eligible members intending to claim a tax deduction for their personal super contributions should lodge with their super fund a Notice of intent to claim or vary a deduction for personal super contributions form (NAT 71121) and receive a confirmation from the trustee the earlier of the following dates:

  • the day that you lodge your tax return.
  • the end of the income year following the year in which the personal contributions were made.

For more information or to download the NAT 71121 form visit the ATO ato.gov.au.


7.5 Taxation of investment returns

Investment returns are taxed up to a maximum rate of 15%. Where the assets are invested in Australian and international equities, the tax payable can be partly offset by imputation credits for franked dividends and foreign tax credits. Any capital gains are limited to two thirds of the gain or the whole of the gain with an indexed cost base, depending on the date that the assets were acquired.


7.6 Taxation of benefits on withdrawal

Tax may be payable when you withdraw a lump sum benefit from Hostplus. The amount of tax will depend on your age, the amount of your benefit, the benefit components and how you decide to use the benefit.

Tax will not be payable if you roll over or transfer your benefits to another complying super fund or if you use your benefit to purchase an income stream e.g. if you rolled over your superannuation to Hostplus Pension.

Lump sum benefits comprise two components.

1. The tax free component which includes:

  • the contributions segment.
  • the crystallised segment.

The contributions segment generally includes all contributions made from 1 July 2007 that have not been included in the assessable income of the fund. Typically these would be a member’s personal contributions that are not claimed as an income tax deduction.

The crystallised segment includes the following existing components of a super interest that were consolidated into the tax-free component on 1 July 2007:

  • the concessional component.
  • the post-June 1994 invalidity component.
  • undeducted contributions.
  • the capital gains tax (CGT) exempt component.
  • the pre-July 1983 component.

The crystallised segment was calculated by assuming that an eligible termination payment representing the full value of the superannuation interest is paid just before 1 July 2007.

2. The taxable component which includes:

  • an element taxed in the fund, and/or
  • an element untaxed in the fund.

The tax that Hostplus deducts will only apply to the element taxed in the fund (for example the 15% tax paid on contributions and investment returns). Any other tax payable will be assessed in your tax return following the payment of the benefit.


7.7 The taxable components of lump sum benefits and tax on contributions

Tax on lump sum benefits

No tax is payable on the tax free component. Tax on taxable components are as per table below:

Age

Tax treatment of lump sum benefits

for the year 1 July 2016  – 30 June 2017

Taxable component – tax element (where 15 % contributions tax has been paid)

Below preservation age

20%

Preservation age - 59 years

Nil up to $195,0001

15% for amounts over $195,0001

60+

Tax free

Taxable component – untaxed element (where 15 % contributions tax has not been paid)

Below preservation age

30% for amounts up to $1.4152  million

45%* for amounts over $1.4152 million

 

Preservation age - 59 years

15% for amounts up to $195,0001

30% for amounts between $195,0001 and $1.4152 million

45%* for amounts over $1.4152 million

60+

15% for amounts up to $1.4152  million

45%* for amounts over $1.4152 million

 

1. Applicable to the 2016-17 income year and indexed annually in line with Average Weekly Ordinary Time Earnings (AWOTE). Increases are applied in increments of $5,000. 
2. This is the untaxed plan cap amount applicable to the 2016-17 income year. The untaxed plan cap is indexed annually in line with AWOTE but only increases in increments of $5,000.

Note: The tax rate figures above do not include the 2% Medicare levy which is also payable.
* Plus the temporary 2% Budget Repair levy if applicable.

Tax on contributions

Type of contribution

Tax on contributions for the year 1 July 2016 – 30 June 2017

Before –tax (concessional*) such as employer, salary sacrifice and self-employed contributions

  • 15% on amounts up to $30,000 a year cap
  • If aged 49 or over on 30 June 2016; 15% on amounts up to $35,000 a year cap
  • Amounts over the cap will be taxed at your marginal tax rate1

After-tax (non-concessional**) from your net salary such as personal and spouses contributions

  • 0% on amounts up to $180,000 a year.
  • 45%1 on amounts more than $180,000 a year.

If under age 65, you can contribute up to $540,000 tax-free in the first year of a three-year period. Any contributions over $540,000 in that three-year period will be taxed at 45%1

1. Note: the tax rate figures above do not include the 2% Medicare levy which is also payable, and if applicable, the temporary 2% Budget Repair Levy for members whose annual taxable income is over $180,000.
If your income (including your before-tax contributions) is over $300,000, all or some of your before-tax contributions will be taxed at 30%.

*Note Proposed Changes:
At the May 2016 Budget the Federal Government flagged the proposal to lower the superannuation concessional contribution cap to $25,000 per annum regardless of age. This change has been proposed but is not yet law.
** At the May 2016 Budget Announcements, the Federal Government flagged that it would introduce a $500,000 lifetime cap for non-concessional contributions. The proposed changes will apply retrospectively to from May 2007. This change has been proposed but is not yet law.




7.8 Part payment of benefits

When a part payment of super is made, you won’t be able to indicate whether you want the benefit taken from your tax free component or your taxable component. Instead, the benefit will generally include both components in the same proportion as they exist in the total benefit.

The table below provides an illustration where a member’s benefit consists of a taxable component as to 60% and a tax free component as to 40%.

Component

Taxable

Tax free

Total

Total benefit

proportion

$60,000

60%

$40,000

40%

$100,000

100%

Part payment of

$20,000 proportion

$12,000

60%

$8,000

40%

$20,000

100%

Balance after payment proportion

$48,000

60%

$32,000

40%

$80,000

100%

Super for temporary residents

For information about contributions and tax on super for temporary residents see: Section 2: How super works - If you’re a temporary resident.


7.9 Goods and Services Tax (GST)

No GST is payable on contributions, on benefits paid, rolled over or transferred, or on the net investment return applied to a member’s account.


7.10 Death benefits

Death benefits are tax free when paid to tax dependants. A dependant for these purposes is a spouse, a child less than 18, a person with whom the deceased had an interdependency relationship on the date of death, or any other person who was a financial dependant of the deceased on the date of death.

The definition of spouse includes same sex couples and the definition of child includes eligible children of same sex couples. This means that same sex couples and their children are able to access the same tax concessions on lump sum death benefits available to married and de facto opposite sex couples. In addition a spouse is recognised when the relationship is registered on the Register of Births and Marriages under State or Territory law.

Any untaxed element in a taxable component of a lump sum benefit – where the benefit included life insurance proceeds – will be taxed at 30% (plus Medicare levy). The untaxed element is the proportion of your insured lump sum death benefit that relates to the period from the date of death to age 65, in comparison to your total service period.

If the lump sum death benefit is paid to a non-dependant, the taxable component will be taxed at 15% (plus Medicare levy) but part of the benefit may be taxed at up to 30% (plus Medicare levy) if it comprises of insurance proceeds. The tax free component will be tax free if paid to a non-dependant.

Anti-detriment payments*

As an additional benefit of being a Hostplus member, the Trustee offers anti detriment payments to its members. We are not obligated under law to pay these amounts.

What is anti-detriment payment?

This purpose of this payment is to refund the tax paid on concessional contributions when a member dies. This can effectively increase the superannuation death benefit available to the member’s dependent beneficiaries. 

Who can receive an anti-detriment payment?

An anti-detriment amount can only be paid to eligible dependents under the Income Tax Assessment Act 1997.

  • A spouse or former spouse of the deceased
  • A child of any age or
  • The estate (provided the ultimate beneficiaries are as above)

Definition of spouse also includes same sex couples.  Certain people in interdependency relationships have a right to be treated as a partner. A former spouse needs to be dependent under the SIS Act (such as a financial dependent or interdependent) in order to receive a death benefit from the fund.

Child can include step or adopted children.

* Note Proposed Change:
At the May 2016 Budget Announcements, the Federal Government flagged removing the ability for beneficiaries to claim anti-detriment payments on a death benefit. This change has been proposed but is not yet law.


7.11 Total and Permanent Disability benefits

Total and Permanent Disability benefits are taxed as a lump sum benefit, with the taxable and tax-free components. Generally, the tax free component will include the proportion of the benefit that relates to the period from the date of total and permanent disablement to age 65.

If you choose to reinvest any of your Total and Permanent Disability benefit payment into Hostplus and after 2 years request a subsequent withdrawal, you may be required to provide us further medical certificates from two legally qualified medical practitioners. This is to certify that due to ill health you continue to be unlikely to ever be gainfully employed in a capacity for which you are reasonably qualified, to remain eligible for an additional tax free threshold .


7.12 Salary continuance (Income protection) benefits

Salary Continuance benefits are generally taxed at your marginal tax rate.


7.13 Terminal Illness benefits

If a member suffers from a terminal illness as (a) certified by two medical practitioners (one being a specialist) and (b) stipulating death within 24 months of the certification, then lump sum superannuation benefits paid are tax free.

This document does not and is not intended to contain any recommendations, statements of opinion or advice. The information is factual and / or general in nature and does not consider any of your objectives, financial situation or needs. You should consider obtaining advice from a licensed financial and taxation adviser and consider the appropriateness of this information, having regard to your particular investment needs, objectives and financial situation.

Host-Plus Pty Limited ABN 79 008 634 704, AFSL No. 244392, RSEL No. L0000093, MySuper No. 68657495890198, Hostplus Superannuation Fund ABN 68 657 495 890, RSE No. R1000054.


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