What are some of the rules that affect your super?
1. Super is simpler
Superannuation accounts now consist of two components only. The two new components are a tax-free component and a taxable component.
If your super is paid to you as a lump sum and you are:
- 60 years of age and over - you pay no tax if the benefit has already been subject to tax on contributions and investment earnings.
- Aged 55 to 59 - you pay no tax on the first $140,000 (2007/2008) of your total payout less the tax-free component. You pay 15% tax plus Medicare levy on the remaining taxable component over the $140,000.
- Under age 55 - you pay 20% tax plus Medicare levy on your entire payout less the tax-free component.
The RBLs (Reasonable Benefit Limits) have also been removed, which means there are no upper limits to how much you can save within super.
2. Contribution caps
Personal (after-tax) contributions have an annual limit of $150,000.
If you are under 65 years of age, you can contribute up to $450,000 in a year but this means the total of your personal contributions during any subsequent 3 year period cannot exceed an average of $150,000 per year.
Contributions over the limit are taxed 46.5%. Contributions under the limit are not taxed.
Employer contributions (including salary sacrifice) and any other contributions for which you intend to claim a tax deduction (e.g. as a self-employed or unsupported person) have an annual limit of $50,000.
If you are aged 50 or older, a transitional limit of $100,000 p.a. applies until 30 June 2012.
Contributions under the limit are taxed 15%. Contributions over the limit are taxed a total of 46.5% (an additional 31.5% tax).
3. Tax File Number (TFN)
The Federal Government's new rules mean there are greater consequences if your superannuation fund does not have your Tax File Number.
If we don't have your TFN, you are unable to make personal contributions.
In addition, employer contributions are taxed at 46.5% instead of 15%. You may be able to retrospectively recover your additional tax by completing the appropriate paperwork.
Please check your most recent member statement or access your account online at www.tasplan.com.au to check that we have your TFN.
4. Employment Termination Payments (ETPs)
These payments can only be contributed to super if they are made under an employment contract in force on 9 May 2006, and the contract specified a payment to you on termination of employment.
ETPs, if directly rolled over into super, generally do not count toward the contribution caps described above, but are subject to 15% contribution tax.
From 1 July 2012, these ETPs can no longer be rolled over to super.
5. Keeping your money in super
The Federal Government has removed the requirement that you must cash your super once you are 65 and retired. This means you can leave your money in super for as long as you like, taking advantage of the lower tax rates that apply to super.
6. Government co-contributions for the self-employed
If you are under 65 years of age, earn less than $58,980 and make a personal contribution, you will be eligible to receive a Government co-contribution. This previously only applied to employees, but has been extended to include self-employed people from 1 July 2007.
Indexation will apply from 1 July 2007 to the $58,980 threshold.
7. Superannuation pensions are becoming simpler and cheaper
Payments you receive from a superannuation pension are tax-free from age 60.
Centrelink's assets test taper rate has been reduced from 20 September 2007. For people with assets close or over the threshold and who currently don't qualify for the age pension, their eligibility to receive an age pension could change.
Another change is that for some types of superannuation pension, the maximum amount of pension payments you can take in a year will be removed.
8. Contribution splitting
From 6 April 2007, you can no longer transfer personal after-tax contributions made on or after 6 April 2007 to your spouse's super account. You are still able to transfer personal after-tax contributions made before that date.
There is no change to splitting taxable contributions and, subject to existing rules, you can still transfer these to your spouse.
If you have any questions relating to any of these issues please ring Tasplan on 1800 005 166.
