GOVERNING LEGISLATION APRA ASIC ATO

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1 Introduction GOVERNING LEGISLATION APRA ASIC ATO TRUST DEED Establishes fund and defines rules ROLL-OVERS/ TRANSFERS To or from other funds SUPERANNUATION FUND Assets invested by trustee for benefit of members CONTRIBUTIONS Members, employers and third parties LUMP SUM OR PENSION Paid to members, or dependants INVESTMENT OF FUNDS = EARNINGS INT Seminars Australia

2 SISA Prudential Requirements FUND OPERATION (PRESERVATION RULES) Composition of Benefits Members' benefits in a regulated superannuation fund may comprise: (1) Preserved benefits (Those that must be preserved until preservation age. Date of Birth Preservation Age Before 1 July July June July June July June July June After 30 June Preserved benefits are the total benefits of the member in the fund reduced by (2) and (3) below: Regs 6.01(2), Thus, preserved benefits are a residual amount. Thus, the preserved benefits of a member include: (1) benefits transferred from another superannuation fund that are preserved benefits in that fund; (2) contributions made, or benefits rolled over or transferred to, the fund which are taken by the trustee to be preserved benefits; and (3) benefits in the fund re-categorised by the trustee as preserved benefits in accordance with the funds governing rules: reg ) From 1 July 2004, employer ETPs rolled over to the fund are preserved benefits. Preservation age will increase from 55 to 60 from Seminars Australia PRD 15

3 SISA Prudential Requirements Conditions of Release/Cashing of Benefits Unrestricted non-preserved benefits may be cashed at any time: reg SISR Preserved benefits and restricted non-preserved benefits may only be cashed if a condition of release is satisfied: reg. 6.18, 6.19 Sch 1 SISR CONDITIONS OF RELEASE Retirement (Note 1) Death Terminal medical condition (Note 2) Permanent incapacity (Note 3) Former temporary resident to whom regulation 6.20A or 6.20B applies, requesting in writing the release of his or her benefits (Note 4): The trustee is required to pay an amount to the ATO under the Superannuation (Unclaimed Money and Lost Members) Act CASHING RESTRICTIONS Nil Nil Nil Nil Amount that is at least the amount of the temporary resident's withdrawal benefit in the fund paid: (a) as a single lump sum; or (b) if the fund receives any combination of contributions, transfers or rollovers after cashing the benefits in a way that ensures that the amount is cashed Amount that the trustee is required to pay to the ATO under the Superannuation (Unclaimed Money and Lost Members) Act Seminars Australia PRD 17

4 Superannuation Guarantee EMPLOYER OBLIGATIONS Minimum Level of Support An employer is required to provide a minimum level of superannuation support of 9.5% Minimum level of support only needs to be provided to employees on salary and wages up to: $54,030 per quarter for the 2018/19 year equates to an annual salary of $216,120 pa All employers are required to contribute (unless specifically exempted) including government bodies, tax exempt organisations, family companies and trusts; and non-resident employers who have employees working in Australia Future increases: Year Ended 30 June % Seminars Australia SGL 3

5 Choice of Fund FEDERAL CHOICE OF FUND Step 1: Identify Eligible Employees Employees may be able to choose their super fund if they are: employed under a federal award; employed under a former state award ( notional agreement preserving state award ); employed under another award or agreement that doesn t require superannuation support; not employed under any state award or industrial agreement (including contractors paid principally for their labour) Seminars Australia COF 3

6 Salary Packaging/Sacrifice/WRA A possible contractual clause to cover sacrifice of potential bonuses as well as other remuneration such as back pay, award increases etc, could be: Any additional remuneration that the employee may be entitled to, over and above that specified in this contract: (1) shall be by way of employer contributions to the employee's nominated superannuation fund; or (2) shall be provided in a form as advised by the employee, but only if such advice is received by the employer prior to the employee becoming entitled to receive the additional remuneration. May salary sacrifice below the minimum wage or minimum award payment. Casey Grammar School v Independent Education Union of Australia [2010] FWA Seminars Australia SAL 11

7 Reportable Superannuation Contributions Time Out: Exercise An employee is on the following package: Cash $70,000 Superannuation 9.5% 6,650 Total remuneration $76,650 The employee decides that he wants to package certain exempt fringe benefits, but he also wants superannuation contributions to remain at $6,650. As a consequence, the following salary package is negotiated: Cash $50,000 Superannuation 6,650 Fringe benefits 20,000 Total remuneration $76,650 Technically, the employer only has to contribute 9.5% x $50,000 = $4,750 for superannuation guarantee purposes. Do you think that ($6,650 - $4,750) $1,900 might be reportable? Seminars Australia RSC 7

8 Employment Termination Payments ETP CAPS Two Types of Caps There are two kinds of caps that must be taken into account when determining how to tax ETPs: ETP Cap ($205,000 for the 2019 financial year) Whole of Income Cap ($180,000 permanently, and is not indexed each year.) Column 1 ETP Cap Only Applies to: A payment made under an early retirement scheme that exceeds the tax-free limit* (Only the amount in excess of the limit is an ETP.) A genuine redundancy payment that exceeds the tax-free limit* (Only the amount in excess of the limit is an ETP.) A payment made because of the employee s permanent disability. Compensation for personal injury. Compensation for unfair dismissal. Compensation for harassment. Compensation for discrimination. Lump sum payments paid on the death of an employee. Column 2 Smaller of the ETP Cap and Whole-of-Income Cap Applies to: A golden handshake whether paid under contract industrial award obligation recognition of prior service. A non-genuine redundancy payment. Severance pay. A gratuity. A payment in lieu of notice. A payment for unused sick leave. A payment for unused rostered days off. An ETP not covered in column Seminars Australia ETP 15