Information for

Financial Services, Financial Advice - AXA Australia

	\| Home \| Superannuation \| Personal Super \| Super Directions \| Government regulations & taxation

Government regulations & taxation

Questions & answers

Below you will find answers to the most commonly asked questions about superannuation and taxes on superannuation funds. The information is current as at 1 July 2007.

If your questions are not answered below, please contact your financial adviser or contact AXA directly.

Who can invest in super?

You can.
Subject to certain contribution caps, anyone under 65 can invest in their own superannuation. Contributions can be made with:

After-tax income (voluntary contributions). You may be able to claim a tax deduction for these contributions. You may also qualify for a Government co-contribution (see below), and/or
Pre-tax income. Typically this involves a salary sacrifice arrangement with your employer, whereby you direct some of your pre-tax income into super.

People aged between 65 and 74 may also be able to invest in super, but a work test applies (ask your financial adviser for details).

Your employer can.
Employers are generally obliged to pay a percentage of an employee’s salary to superannuation, and may contribute more if they wish, up to certain maximums.

Superannuation Guarantee (SG) and award contributions are compulsory amounts paid into your account by your employer (if you qualify). The amount paid is set by legislation and is a percentage of your gross income.
Your employer can make extra contributions to your super account too, up to certain maximums.

Your spouse can.
If you are under age 70, you can make contributions on behalf of your spouse, up to certain maximums.

What is the maximum I can invest in super?

You can invest as much as you like in super, but the ATO imposes higher taxes once you contribute over certain caps. There are different caps for concessional contributions and non-concessional contributions.

Concessional contributions include employer contributions, pre-tax contributions made by you and any contributions you make for which you claim a tax deduction.

Concessional contributions are subject to a cap of $50,000 per person per year.
A five-year transitional cap of $100,000 per year applies for the financial years 2007/08 to 2011/12. You will be eligible for this transitional cap if you are at least 50 years of age by 30 June of the relevant financial year.
Contributions under the cap are taxed at 15 per cent. Contributions in excess of the cap are taxed at an additional 31.5 per cent. If you incur this liability, you are allowed to withdraw an amount from your super fund to pay the additional tax. Concessional contributions above the limit will also count towards the non-concessional contributions cap.

Non-concessional contributions include:

Your after-tax contributions for which you do not claim a tax deduction, and
Contributions made by your spouse.

Non-concessional contributions are subject to a cap of $150,000 per person per year. People under age 65 are able to bring forward any future entitlements to two year’s worth of contributions, giving them a cap of $450,000 over three years. Contact AXA or your financial adviser for details.

Non-concessional contributions under the cap are tax-free when invested in super and tax-free when withdrawn or paid into an income stream after retirement. The earnings on non-concessional contributions are taxed at 15% in a super fund.

Contributions in excess of the cap are taxed at the highest marginal tax rate plus Medicare levy. If you incur this liability you must withdraw an amount from your super fund to pay the additional tax.

What other incentives are there to join the Super Directions Personal Super Plan?

Personal contributions for unsupported or self-employed members
If you are self-employed or substantially self-employed, you may be able to claim a tax deduction for personal contributions.

Personal contributions for employer-supported members
If your employer contributes to superannuation for you or is obligated to do so under an award or the Superannuation Guarantee legislation (whether the employer fulfils those obligations or not), you will not generally be eligible for a tax deduction for your own contribution.

Employer contributions
A tax deduction may be available to employers on their contributions to your Personal Super Plan.

Spouse contributions
Spouse contributions may be made on your behalf if:

you are under age 65, or
you are between age 65 and 70 and have worked at least 40 hours over 30 consecutive days in the current financial year.

The definition of 'spouse' for the purpose of spouse contributions legislation includes persons living together on a bona fide domestic basis as husband and wife although not legally married to each other. It does not include persons living separately and apart from one another on a permanent basis. You must notify the Administrator if you cease to be eligible.

Contributions may be made by a person for their spouse, and become superannuation benefits of the spouse.

Spouse contributions are not taxed upon receipt into the superannuation fund, however they are counted towards the recipient’s non-concessional cap. Contributions in excess of the cap are taxed at the highest marginal tax rate plus Medicare levy.

A tax offset may be available to a contributing spouse, depending on the income of the receiving spouse.

What is the Government co-contribution scheme?

If you are employed or self-employed, under age 71, and earning less than $58,980 per annum, you may be eligible for a Government co-contribution to your super. This is where the Government matches your voluntary (after tax) contributions to super with its own co-contribution.

If you earn less than $28,980 p.a. the co-contribution amounts to $1.50 for every $1.00 you contribute, up to a maximum of $1,500 in any one financial year.
If you earn between $28,980 and $58,980 the co-contribution adjusts downwards, depending on what you earn.

A number of conditions apply. Contact your financial adviser if you believe you may be eligible

How are contribution payments taxed?

If you have provided AXA with your tax file number, all employer contributions paid to the fund, any contributions paid from pre-tax income and any contributions from after-tax income for which you claim a tax deduction are taxed at 15 per cent, as long as they are under the concessional contributions cap. The ATO may charge an additional 31.5 per cent for any concessional contributions that exceed the cap.

If you have not provided AXA with your tax file number, AXA is obliged to tax your contributions at the highest marginal tax rate plus Medicare levy (currently 46.5%). If you subsequently provide your TFN within the financial year the contribution was made, or three financial years past the receipt of the contribution, the no-TFN tax will be refunded.

If you have made after-tax personal contributions you will be contacted and asked to provide details on whether or not you have claimed (or intend to claim) a tax deduction on these contributions for the previous tax year. AXA Australia will only deduct contributions tax on the amount you advise that you have claimed or will be claiming as a deduction.

You must notify AXA Australia of your intent to claim a deduction, either by the time you lodge your income tax return, or by the end of the following financial year after the contribution was made, whichever is earlier.

If you have provided AXA with your tax file number, personal after-tax contributions for which you cannot (or do not) claim a tax deduction will not be subject to tax as long as they are below the non-concessional contributions cap. The ATO may charge 46.5 percent for any non-concessional contributions that exceed the cap.

If you have not provided AXA with your tax file number, AXA cannot accept any personal after-tax contributions.

Is tax paid on earning in my Personal Super Plan?

Earnings from complying super funds are taxed at a lower rate than most other forms of savings. The statutory rate is 15 per cent of net investment earnings, but the effective tax rate would generally be less than this. This applies particularly to those investment portfolios with a significant exposure to equity investment due to concessional tax on capital gains and the availability of imputation credits. This reduces the overall tax on earnings paid by the fund. Super Directions Personal Super Plan pays this tax and it is taken into account when unit prices are set.

Important Note: The lump sum rates described will only apply to your benefit if the Administrator has received your TFN. Failure to provide your TFN will mean tax will be deducted from your taxable component at the top marginal tax rate plus the Medicare Levy. This information is based on current tax legislation.

How are benefit payments taxed?

If you are aged 60 or over:

All lump sum benefits paid to you are tax-free. Prior to 1 July 2007 a Reasonable Benefit Limit applied. There is now no limit to the amount of benefit that can be paid from a fund (subject to preservation rules).
All pension payments are tax-free. Prior to 1 July 2007 a Reasonable Benefit Limit applied.

If you are under 60:

Lump sum benefit payments are divided into two components, a tax-free component and a taxable component.

Age	Tax payable on taxable component
Under age 55	20 per cent plus Medicare levy
Aged 55 to 59 (inclusive)	No tax on the first $140,000 15 per cent + Medicare levy on the balance

For individuals aged between 55 and 59, a pension offset of 15 per cent may apply to the taxable portion of any pension payments.
A 15 per cent tax offset will also apply to pensions purchased from death benefit proceeds or a total and permanent disability payment, regardless of the member’s age.

Important:

The amount of each component and the tax treatment applicable will be detailed in the paperwork you will receive with your benefit.
Rolling over superannuation benefits in full to your Personal Super Plan will defer your tax liability.
Death benefits may be taxed differently. Further details can be obtained from your financial adviser.

Do I need to provide my tax file number (TFN)?

You may wish to supply your TFN to AXA. If you don’t provide your TFN, an additional 31.5 per cent tax will be payable on concessional contributions received by the Fund. If you do not provide your tax file number, AXA cannot accept any personal contributions.

What will AXA do with my TFN?

Your tax file number is confidential. Before you provide your tax file number we are required to tell you the following:

1. Tax file numbers are collected under the Superannuation Industry (Supervision) Act 1993, Retirement Savings Accounts Act 1997, the Privacy Act 1988 and taxation acts (including the income and superannuation surcharge tax).
2. The Trustee and Fund Administrator will only use your tax file number for superannuation purposes, including:

Finding or joining together your superannuation benefits
Calculating the correct tax on employment termination payments
Passing it to the Trustee of another superannuation fund or provider of a retirement savings account when transferring your benefits. You may give us written instructions not to pass it on before any transfer
Passing it on to the Australian Taxation Office (ATO):

These purposes may change in the future as a result of legislative changes.

What happens if I do not quote my TFN?
You are not obliged to provide your TFN to your superannuation fund. However, if you do not provide your TFN your fund may be taxed at the highest marginal tax rate plus the Medicare levy on contributions made into your account in the year, compared to the concessional tax rate of 15%. Your fund may deduct additional tax from your account.

If your superannuation fund does not have your TFN, you will not be able to make personal contributions to your superannuation account.

If you are a non resident and you do not provide a TFN, the Trustee must withhold the prescribed rate of tax when paying a lump sum benefit. A tax exemption code is not recognised as valid TFN.

Choosing to quote your TFN will also make it easier to keep track of your superannuation in the future.

How do I provide my TFN?

You may notify us of your TFN by telephone, electronically via this website or in written format by downloading the TFN Notification form from the ‘forms’ section of the AXA website. If the Trustee has your TFN and you decide you do not want it used any longer, let the Trustee know and the Trustee will arrange for it to be deleted from the records.

Preserved Benefits

A preserved benefit is that part of your superannuation benefit that must be retained within a superannuation fund, deferred annuity, retirement savings account or approved deposit fund (including roll over vehicle) until one of the following events occurs:

attainment of age 65;
termination of gainful employment on or after age 60;
total and permanent disablement established to the satisfaction of the Trustee;
death;
severe financial hardship established to satisfaction of the Trustee based on specified guidelines;
APRA approves the early release on specified grounds;
certain temporary residents departing Australia permanently;
temporary incapacity, under specified conditions;
permanent retirement on or after reaching age 55 (if you were born before 1 July 1960). The preservation age has been increased for persons born on or after 1 July 1960 as follows:

Date of Birth	Preservation Age
Before 1 July 1960	55 years
Between 1 July 1960 and 30 June 1961	56 years
Between 1 July 1961 and 30 June 1962	57 years
Between 1 July 1962 and 30 June 1963	58 years
Between 1 July 1963 and 30 June 1964	59 years
After 30 June 1964	60 years

All contributions and investment earnings (including earnings on non-preserved amounts) will be preserved. Any rollover amounts or amounts transferred from a previous fund will retain their preservation classification. Employer Temination Payments (ETPs) rolled over on or after 1 July 2004 are also preserved until a condition of release is met.

Repayment during cooling-off period

Any refund due as a result of cancelling your membership of the Personal Super Plan during the cooling-off period will be made to the payer of contributions in accordance with the following rules:

If any of the amounts were rolled over from another superannuation fund or approved deposit fund and were preserved or restricted non-preserved benefits in that other fund, then those benefits will be transferred to another regulated superannuation fund or approved deposit fund of your choice.
If the amounts were rolled over and are unrestricted non-preserved benefits, then those benefits can be paid to you or rolled over as directed by you.
If any of the amounts were paid by an employer, then those benefits will be refunded to the employer or as the employer directs.
If the amounts were not included in any of the above categories, e.g. your personal contributions, then those benefits will be returned to you.
If no nomination is received from your employer or you, your benefits may be transferred to an Eligible Rollover Fund.

The above information does not replace the full description or terms and conditions of the product. You are advised to read the Product Disclosure Statement (“PDS”) in relation to this product carefully before deciding if this product is appropriate to your needs. Application can only be made by completing an application form contained in a current PDS.

Trustee of the Super Directions Fund: N.M. Superannuation Pty Ltd ABN 31 008 428 322 AFS License No. 234654

| | |

| | | | |