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Week 9

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1 AYB240 – SUPERANNUATION REGULATION AND PRACTICE LECTURE 9: TAXATION OF SUPER FUNDS Super Regulatory System and Tax Concessions  SIS Act links regulatory compliance and taxation concessions o Give notice that fund complying with SIS  SIS Act compliance notice issued by o ATO for SMSFs o APRA for all other super funds  Taxation o Complying fund = 15% o Non-complying fund = 45% Taxation Points  Contributions phase o Taxed within the superannuation fund  Investment phase o Taxed within the superannuation fund  Benefit payment phase o Benefit recipient is taxed o This phase will be covered in Weeks 12 and 13 Taxation of Super Funds ASSESSABLE INCOME less ALLOWABLE DEDUCTIONS = TAXABLE INCOME TAXABLE INCOME X MARGINAL RATE = TAX PAYABLE Assessable Income  Assessable contributions o Concessional contributions  Contributions made on behalf of member  E.g. employer SG contributions  Personal contributions made by member and claimed as personal tax deduction  Member must give super valid notice of intent to claim contribution as tax deduction  Made by self-employed or individuals who earn less than 10% of their income as ‘employees’  Untaxed amounts rolled over from another superannuation fund  Certain amounts transferred from a foreign superannuation fund  E.g. Excess of amounts vested in the member o Tax Payable on Assessable Contributions  Complying superannuation fund  15%  Non-complying superannuation fund  45%  Contributions received from an individual who has not provided the fund with their tax file number (non-TFN contributions)  46.5% 2  Investment earnings o Investment income (interest, dividends, rent) taxed @ 15%  Tax payable offset by franking credits on fully or partly franked dividends  Same gross-up rules apply as for other taxpayers  Franking credits can offset tax applying to other income and contributions  Excess imputation credits refunded  Capital gains o Assets held for more than 12 months one-third discount applies to the capital gain  Effective tax rate = 10% o No pre-CGT asset exemption for superannuation funds o Deemed acquisition at market value at 1 July 1988 for assets acquired prior to that date o Capital losses applied to offset capital gains  Tax on Superannuation Fund Income – Pension phase o Once superannuation fund is in pension payment phase  Investment income tax free  Accumulated capital gains tax free  Only that component of fund that is attributable to retired members o Opportunity if approaching retirement - carefully consider disposals o Tax avoidance provisions apply  Assessable income from non-arm’s length transactions o Income derived from non-arm’s length transactions  E.g. Shares in a company acquired at less than market value o Private company dividends  Except if it is at arm’s length o Income from a discretionary trust  No fixed entitlement o Taxed @ 45% Contributions Excluded from Assessable Income  Non-concessional contributions  Rollovers from a taxed fund  Government co-contribution  Certain amounts transferred from a foreig
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