Superannuation - Frequently Asked Questions

What is a Self-Managed Superannuation Fund (SMSF)?

• It’s a super fund that’s run by the members (limited to four fund members)
•  Each member is required to be an individual trustee of the fund or a director of the trustee company 
• There are special rules for single member funds 
• The ATO recommends combined assets valued at $200,000 before establishing a SMSF
• SMSFs are the fastest growing sector of the superannaution fund industry, there are now 375,000 SMSFs holding $300 billion in assets

How can a SMSF benefit me?

• SMSF can be a very effective strategic planning vehicle
• Provides flexibility now and in retirement
• Members/trustees have input into the investment decisions and asset allocation of the fund
• Small business can use the fund to acquire the business premises
• The most tax effective vehicle for members to arrange their life insurance
• Estate planning

What role does the trustee of a SMSF play?

When you establish a self managed fund you will be wearing two hats, one as trustee, the other as a member.

The trustee’s responsibility and sole purpose of the fund is to provide benefits to its members at:

•  Retirement;
•  When you reach 65;
• Upon death or disability; and 
• Incidental benefits

In addition:

• Trustees need to establish a written investment strategy for the fund 
• Super fund has its own ABN & TFN and completes its own tax return 
• Trustee’s will need advice on investment rules, managing the paperwork, ATO reporting requirements and end of year accounting and audit

What are the compliance requirements of SMSF’s?

• Annual financial accounts and taxation return to be lodged with the ATO;
• Annual accounts are required to be audited by an approved auditor;
• Investment strategy to be prepared;
• Superannuation trust deed to be prepared and maintained in line with changes in the law; and
• Trustee declarations, minutes and resolutions must be retained.

What if my super is in a few different funds?

If you find you have many superannuation accounts because you have changed jobs often, you can combine these accounts by contacting your superannuation fund and advising them of the fund you want your super to be rolled into.

Combining accounts or transferring accounts from one superannuation fund to another is called a rollover. The advantage of combining all super accounts into one means you can reduce the amount of ongoing fees and charges by industry superannuation funds.

Can I salary sacrifice my superannuation?

Yes. Salary sacrifice is an arrangement by which you agree to forego part of your future salary or wages in return for your employer providing benefits of a similar value. This reduces your taxable income.

Your salary sacrificed contributions are paid as employer contributions to your complying superannuation fund.

Salary sacrificed contributions count towards the 9% employer contributions required to meet the superannuation guarantee. Your salary sacrifice could reduce or eliminate the amount of employer contributions required to be paid by your employer on your behalf. For this reason, it is advisable for all the terms of the arrangement to be fully and clearly documented.

Can I make my own additional contributions?

Yes. These are called non-concessional contributions and are paid out of your after-tax money. They will increase the portion of funds you can withdraw tax-free in transition to retirement phase and upon death if benefit paid to a non-dependant (ie child over 18 yrs).

If you make personal contributions to your superannuation fund, you may be eligible to receive up to $1,500 per year from the government which goes towards your retirement savings. This is called the Super Co-contribution.

Who is eligible for the Super Co-contribution?

To be eligible for the Super Co-contribution, you must:

• make eligible personal superannuation contributions
• have a total income of less than $58,000 per year
• earn at least 10% of your total income from eligible employment
• lodge a tax return
• be under 71 years of age at the end of the income year, and
• not be a holder of an eligible temporary resident visa at any time during the income year.

Can I put money into my superannuation even if I’m not working?

From 1 July 2004, you can make your own contributions to a superannuation fund or retirement savings account if you are not working, provided you are under 65 years of age.

If you are 65 years or older, you can make your own contributions if:

• you are not yet 75 years old, and
• you have worked at least 40 hours in a period of no more than 30 consecutive days during the financial year.

You cannot make your own contributions once you have reached 75 years of age. You should check with the superannuation fund trustee to see if you are able to pay contributions to the fund.

Can I put money into a superannuation fund for my spouse and/or child?

You can make contributions on behalf of your spouse if:

• your spouse is under 65 years of age, or
• your spouse has reached 65 years of age but not reached 70 years of age , and worked at least 40 hours in a period of no more than 30 consecutive days during the financial year.

You may be able to claim a tax offset in your income tax return for contributions you make for your spouse, depending on your spouse’s income for the year. Your spouse’s income and reportable fringe benefits must be below $13,800 to be entitled to the tax offset.

You can also make contributions on behalf of a child if you wish. Contributions made on behalf of a child do not attract a tax deduction or tax offset for the person making the contribution.

What is a Transition To Retirement pension (TTR)?

This is an income stream you can start to take from your superannuation fund upon reaching preservation age. You do not need to retire to start taking this pension.

The earnings within your super fund become tax free. If you are under 60, you get a 15% tax rebate on the amount you withdraw from the fund. For those over 60, the amount is tax free. Dependant on your age, there are minimum and maximum amounts that must be withdrawn each year to be compliant.

Your preservation age depends on your date of birth, as follows:

Date of birth	Preservation age
Before 1/7/60	55
1/7/60 – 30/6/61	56
1/7/61 – 30/6/62	57
1/7/62 – 30/6/63	58
1/7/63 – 30/6/64	59
After 30/6/64	60

What is the superannuation guarantee?

The superannuation guarantee is the responsibility of employers. Employers must contribute a minimum of 9% of ‘ordinary time earnings’ for their ‘eligible employees’ into a complying superannuation fund. This must be done at least every quarter

Most employees are also eligible to choose the superannuation fund for any superannuation guarantee contributions their employer makes for them.

Who is eligible for superannuation?

Employers generally should be making superannuation guarantee contributions for their eligible employees to a complying superannuation fund or retirement savings account if employee is:

• aged between 18 and 70, and
• paid $450 or more in a calendar month.

This applies for full-time, part-time and casual employees, including those who work under a contract principally for the labour of the person. For those paid under an award rate, the award rate may state that the employer must contribute to superannuation even if they are paid less than $450 a month. An employer must follow both the superannuation guarantee laws and the award rules.

Who is not eligible for superannuation?

In limited circumstances, employers do not have to provide superannuation guarantee contributions if employee:

• paid less than $450 (before tax) within any calendar month
• under 18 years of age and work 30 hours or less a week
• 70 years old or more
• paid to do work of a domestic or private nature for 30 hours or less a week
• a non-resident employee paid for work done outside Australia, or
• certain other foreign executives.

Does super need to be paid for contractors?

The superannuation guarantee covers workers engaged under a contract that is wholly or principally for their labour. This means that a contractor (the party to the contract) can be considered to be an employee under the superannuation guarantee. Even if you quote an Australian business number (ABN), you may be an employee for superannuation guarantee purposes.

The superannuation guarantee does not apply when a contract is made with someone other than the person who will provide labour. For example, your employer has no obligations under the superannuation guarantee if the contract is with a company or partnership.

Your employer also has no superannuation guarantee obligations if the person they have contracted with is engaged to produce a result or is free to engage other people to perform the work. In either of these situations, the contract is not for the labour of the individual.

For the purposes of the superannuation guarantee, labour includes mental and artistic effort as well as physical work.

A contract can be either made orally or in writing, and needs to state clearly (or imply) that the work must be performed by the party to the contract.

What happens to my employer if they do not pay superannuation contributions?

Employers who do not pay enough superannuation contributions for their eligible employees have to submit a Superannuation guarantee charge statement - quarterly and pay the superannuation guarantee charge to the Tax Office

The charge is made up of:

The superannuation guarantee contributions that were not paid

+

Interest on that amount

+

An administration fee

The deadlines an employer has for providing sufficient superannuation guarantee contributions are shown in the table below.

TABLE: Superannuation guarantee contribution deadlines:

Superannuation guarantee quarter	Due date for providing sufficient superannuation guarantee contributions	From 1 January 2006 cut-off dates for lodging this statement and paying the superannuation guarantee charge
1 July – 30 September	28 October	28 November
1 October – 31 December	28 January	28 February
1 January – 31 March	28 April	28 May
1 April – 30 June	28 July	28 August

How do I find lost superannuation?

The Tax Office has built a register of lost members, so that people who have lost contact with their benefits can regain control of their superannuation money. The Lost Members Register holds lost member details from all regulated superannuation funds in Australia, other than self-managed superannuation funds.

SuperSeeker - an online service.

Or SuperSeeker self-help phone service, which is available by phoning 13 28 65.

These automated services advise you of any potential matches found on the Lost Members Register and if the Tax Office holds any superannuation monies in your name (such as unclaimed superannuation guarantee contributions).

You will need to quote your tax file number to utilise these services.