Taxation

Super and tax

Your super may be taxed at three stages:

• when certain contributions (e.g. employer, salary sacrifice) are paid to your super
• when your investments in your super earn income; and
• when you withdraw money from your super before age 60.

However, regardless of how and at what stage your super is taxed, it is still taxed at concessional levels compared to other types of investments, which is why super can be such a tax-effective way to grow your retirement savings.

Employer contributions

Your employer's contributions to the Fund for you are subject to contribution tax at 15% in the Fund (these contributions include before-tax salary sacrifice contributions).

Deductible personal contribution by the self-employed

Personal after-tax contributions made by self-employed or substantially self-employed members where they claim a tax deduction for those contributions are subject to contributions tax at 15% in the Fund.

Self-employed and substantially self-employed people (i.e. those who earn 10% or less of their income and reportable fringe benefits from employment) under the age of 75 may be entitled to a tax deduction for personal after-tax contributions made to their superannuation fund. From 1 July 2009, contributions which are sacrificed to Maritime Super will count as income in applying this test. Refer to 'Tax deductions for contributions made by the self-employed' below.

No-TFN Tax

If Maritime Super does not hold your Tax File Number (TFN) on the last day of the financial year, you may end up paying an additional No-TFN tax at 31.5% on your employer contributions and personal after-tax contributions you have claimed as a tax deduction. This tax is in addition to the 15% contributions tax.

If you joined Maritime Super (or SERF) prior to 1 July 2007 and these contributions are $1,000 or less for the applicable financial year, this tax will not be payable.

You may be able to apply to the Trustee for a refund of any no-TFN tax withheld in Maritime Super if you supply your TFN to Maritime Super within the three financial years following the financial year in which the contributions are made.

If Maritime Super does not hold your TFN, we will also be unable to accept your after-tax personal contributions, spouse contributions and Government co-contributions, which will generally be refunded to the contributor within 30 days (subject to permitted adjustments).

Contributions that exceed the limits

There are limits (caps) on the amount of contributions that can be made to super in a financial year, without incurring unfavourable tax treatment. These caps apply to all contributions made by you, or on your behalf, in a financial year to all of your super funds. As Maritime Super is unaware of all your super circumstances, it is up to you to monitor the total amount of contributions made by you or on your behalf in a financial year.

If contributions are made in excess of the cap(s), the excess contributions will generally be taxed at least 46.5%.

The Australian Taxation Office (ATO) will issue you with an assessment for the additional tax and a Release Authority if you exceed either the concessional or non-concessional contributions cap (or both).

If assessed for excess concessional contributions tax, you can pay the additional tax directly to the ATO or you can send the Release Authority to one of your super fund(s) within 90 days of the date of the Release Authority, for the fund to pay the tax liability from your super account or pay an amount to you.

If assessed for excess non-concessional contributions tax, the additional tax can only be paid from your super fund account. You must provide the Release Authority issued to you by the ATO to your super fund within 21 days of the date of the Release Authority. The fund will pay the tax on your behalf and deduct the amount from your account.

Refer to the section titled 'How much can be contributed without incurring additional tax?' in the Contributions section for more information on contribution limits.

Rollovers into Maritime Super

There is generally no tax if you transfer benefits from one Australian superannuation fund to another. However, the taxable component that you rollover or transfer from an untaxed superannuation source (i.e. a rollover from an unfunded government superannuation scheme) will be taxed at 15%. The same applies to the taxable component of a Directed Termination Payment (DTP) from an employer (i.e. an employer termination payment that is specified in an existing employment contract or workplace agreement as at 9 May 2006 and is paid into a superannuation fund before 1 July 2012).

Tax at the rate of 46.5% will apply to untaxed amounts over $1.155 million (for 2010/11 and indexed annually) rolled over from an untaxed superannuation source (withheld by the transferor fund). The taxable component of a DTP over $1 million (which can be reduced by certain other payments) is included in your concessional contributions.

If you are rolling over a payment from an overseas superannuation fund to an Australian fund, special rules apply. You should seek professional advice before making such a transfer.

Tax on investment earnings

Complying superannuation funds pay a maximum 15% tax on their investment earnings. Usually, the actual tax rate is lower due to imputation credits on share dividends and foreign tax credits. Capital gains on fund assets held for longer than 12 months are taxed at 10%, and no tax is payable on the earnings on assets used to fund income streams.

Tax on benefits

You may have to pay tax when you withdraw money from your super. The amount paid will depend on your own circumstances (such as your age, how your super benefit is paid, the components of your super benefit and whether you have provided your TFN to your super fund).

Your benefit payment comprises a maximum of two components, a tax-free and a taxable component.

Your tax-free component will not be taxed when your benefits are paid to you as a lump sum or pension. Your tax-free component consists of:

• amounts crystallised at 30 June 2007 (i.e. pre-July 83 component, CGT exempt component, post-June 94 invalidity component, concessional component and undeducted contributions at 30 June 2007)
• personal contributions (not advised as being claimed as tax deduction), spouse contributions and co-contributions made on or after 1 July 2007, and
• the tax-free amount of any rollover into the Fund on or after 1 July 2007.

The taxable component is the remainder of your benefit when paid to you. It may include two parts – one where tax has been paid (as the benefit has accumulated or accrued) and one where tax has not yet been paid. These are called taxed and untaxed elements respectively. In Maritime Super an untaxed element is only payable in certain death benefit payments.

If you cash in or roll over part of your benefit, the benefit will be made up of a tax-free component and a taxable component paid in the same proportion as your total benefit. This means that you cannot elect to withdraw just your tax-free component to avoid paying tax on the benefit payment.

Tax free benefits - aged 60 or over

On or after age 60, all benefits paid to you from Maritime Super either as a lump sum or as a pension are tax free.

Tax on benefits - aged under 60

For lump sum payments:

• you pay no tax on the tax-free component.
• if you have reached your preservation age but are less than 60, you pay no tax up to the low rate cap ($160,000 for 2010/11) on the taxable component. You pay 15% (plus the 1.5% Medicare levy) on any amount over the low rate cap.
• if you have not reached your preservation age, you pay 20% tax (plus the 1.5% Medicare levy) on the taxable component.

Additional tax may also be payable on the taxable component if Maritime Super does not hold your TFN.

For pension payments:

• you pay no tax on the tax-free component.
• if you have reached your preservation age but are less than 60, the taxable component is taxed at your marginal tax rate (plus the 1.5% Medicare levy). You are also eligible for a 15% tax offset.
• If you have not reached your preservation, the taxable component is taxed at your marginal tax rate (plus the 1.5% Medicare levy). A 15% tax offset may also apply if your pension payment is a disability superannuation benefit (as defined by legislation).

Tax on death benefits

Paid as a lump sum

• no tax is paid on death benefits paid to a tax dependant
• tax is paid on death benefits paid to a non-tax dependant. The tax free component is tax free. The taxed element of the taxable component is taxed at 15% (plus the 1.5% Medicare levy). The untaxed element of the taxable component is taxed at 30% (plus the 1.5% Medicare levy).
• no tax is deducted by the Fund when a death benefit is paid to the deceased member's Estate. The Estate will withhold tax according to whether the benefit is paid to a tax dependant or not.

Additional tax may also be payable on the taxable component if the beneficiary does not provide Maritime Super with his/her TFN.

A 'tax dependant' includes:

• your spouse (including an opposite or same-sex de facto partner) or former spouse (including an opposite or same-sex former de facto partner)
• your children under the age of 18 (including step-children, adopted children, children of a same-sex relationship, children of an opposite or same-sex de facto partner, ex-nuptial children, IVF children and children from certain surrogacy arrangements)
• anyone financially dependent on you at the time of your death; and
• anyone who is in an interdependency relationship with you at the time of your death.

Paid as a pension:

The taxation of a death benefit paid as a pension depends on the age of both the deceased member and the benefit recipient. The following table is a summary of how a deceased member's death benefit would be taxed if paid as a pension:

Please note, death benefits can only be paid as a pension to a dependant and, in the case of a child aged 18 or more, only if the child is financially dependent on you and not yet age 25 or if the child suffers a disability (as defined by legislation).

Tax on terminal illness benefits

If you are diagnosed with a terminal illness, you can access your benefits as a tax free lump sum. To qualify, 2 registered medical practitioners must certify that you suffer from an illness or have incurred an injury that is likely to result in your death within a period of 12 months. One of these medical practitioners must also be a specialist practising in the area related to your condition.

Tax on permanent disability benefits

A lump sum benefit paid to a member aged less than 60 who is permanently disabled may include an additional tax-free component, calculated as the portion of the benefit attributable to future service to last retirement age (usually age 65). To receive this tax concession, two (2) legally qualified medical practitioners must have certified that because of your ill-health (whether physical or mental), it is unlikely that you will ever be gainfully employed in a capacity for which you are reasonably qualified by education, experience or training.

Super lump sum – less than $200

A member who withdraws their entire super benefit of less than $200 as a lump sum will receive it tax free provided the following criteria is met:

• the member terminated employment with their employer paying contributions on their behalf to Maritime super (and they have permanently ceased employment in the seafaring industry if they are an Accumulation and Contributory Accumulation member) and their preserved benefit at the time of termination is less than $200; or
• the member is a lost member who is found and the entire amount of their benefit in the Fund is less than $200

Tax deductions and rebates available to members

In addition to the concessions available for benefit payments, the following tax deductions and offsets may be available to you.

Tax offset for eligible spouse contributions

You may be able to claim an 18 per cent tax offset on superannuation contributions of up to $3,000 made on behalf of your low income or non-working spouse. The maximum offset available is $540. The maximum contribution eligible for the tax offset reduces by $1 for each dollar your spouse's assessable income and total reportable fringe benefits exceeds $10,800, reducing to zero where your spouse's assessable income and total reportable fringe benefits are $13,800 or more.

From 1 July 2009, salary sacrifice contributions and other contributions made your spouse’s employer which your spouse is able to influence (e.g. the size of the contribution, whether made before or after-tax) will be counted towards your spouse’s assessable income for this purpose.

A spouse by marriage (other than a spouse who lives separately and apart from you on a permanent basis) and a de facto partner (of the opposite or same sex) is eligible to claim this tax offset.

The rebate is for the person making the contribution into their spouse's account. It is important to advise the Fund that it is a spouse contribution and the recipient spouse's account details.

Tax deduction for contributions made by the self employed

Self employed and substantially self-employed people (i.e. those who earn 10% or less of their income and reportable fringe benefits from employment) under the age of 75 may be entitled to a tax deduction for after-tax personal contributions made to their superannuation fund.

If you are self-employed (or substantially self-employed) and you want to make a contribution to the Fund, you must advise Maritime Super, using a Notice of Intent to Claim a Tax deduction for superannuation contributions form, that a tax deduction is to be claimed for your contribution generally before the earlier of the date you lodge your income tax return or the end of the following financial year. Maritime Super will also accept the Australian Taxation Office’s Notice of Intent to Claim or Vary a Deduction for Personal Super Contributions form which is available from their website.

Proposed super contributions tax rebate for low income earners

The Federal Government has announced in its 2010 Budget that it will provide a new super contributions tax rebate of up to $500 annually for concessional contributions (includes employer, salary sacrifice and personal deductible contributions) from 1 July 2012 made by, or on behalf of low income earners (i.e. with adjustable taxable incomes of up to 37,000 p.a.). This is based on concessional contributions of at least $3,333 for the year. This would mean that members with an adjustable taxable income of $37,000 or less, in effect, will not pay the 15% contributions tax on concessional contributions.

Superannuation Surcharge

The surcharge was an additional income-tested tax which applied between 20 August 1996 and 30 June 2005. In some instances, the Australian Tax Office may request payment of an outstanding surcharge obligation from a member's account.