Superannuation. Overview. Superannuation Contributions

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1 Superannuation Overview Superannuation is a concessionally taxed structure and long-term savings vehicle designed specifically to accumulate funds for retirement. Superannuation provides a tax effective structure during the contribution and accumulation phases leading up to retirement, and the tax effectiveness increases once a pension has commenced. Investing in superannuation offers many advantages over using non-superannuation investments. These advantages include: Concessional Tax Rates The major attraction of superannuation is the concessional tax treatment which includes: Income is taxed at a maximum rate of 15% (or less if the fund has franked dividend income); Capital gains are taxed at a maximum rate of 10% on assets that have been held for at least 12 months (or 15% for assets that have been held for less than 12 months); Once you commence an income stream, if over 60 the tax rate applicable to both income and capital gains is 0% (offering a significant tax planning advantage over non-superannuation investing); and In addition, there are additional tax deductions and rebates available that make superannuation an attractive savings vehicle. Over the long term, the compounding effect of these lower tax rates can be substantial when compared with investments held outside the superannuation environment. Tax Planning Opportunities Superannuation also provides a number of tax planning opportunities: This is possible because Capital Gains Tax does not apply to account-based pensions. This offers a significant tax planning advantage over nonsuperannuation investing. Once a normal accountbased pension has commenced you are able to withdraw the entire balance tax free if you wish. You can effectively eliminate any Capital Gains Tax liability that has accrued on your superannuation assets if you convert your superannuation to a retirement income stream at a later date (providing the super fund allows this). Once you reach age 60, your superannuation assets can be drawn down tax free, either as lump sum withdrawals or as an income stream, assuming you meet a condition of release. Note: Since 1 July 2017 there is a limit on the amount of super you can transfer to pension phase within the superannuation system. For more information refer to the Retirement Income Streams fact sheet. Administrative Ease Superannuation also provides the following administrative advantages: The superannuation provider undertakes all the required reporting and investment administration issues for you (excluding SMSFs); and The investment earnings on the fund can be automatically reinvested. Investment Choice Many superannuation providers offer a wide range of investment options and differing risk levels to assist in constructing a suitably diversified investment portfolio. Superannuation Contributions Contributions into superannuation can be facilitated two ways: Concessional Contributions Concessional contributions are generally made to superannuation from pre-tax income and for which a tax deduction is claimed. These contributions are generally assessable to the fund and attract contributions tax. Concessional contributions include: Superannuation Guarantee (SG) contributions; 2013 FMD Financial. FMD is an Authorised Representative of Paragem Pty Ltd, AFSL

2 Salary sacrifice contributions; and Personal contributions where a tax deduction is claimed. Annual Concessional Contribution Caps 2017/2018 Age Concessional Contributions Any $25,000 Non-Concessional Contributions Non-concessional contributions are generally made to superannuation from after-tax income and for which no tax deduction is claimed. These contributions are not generally assessable to the fund and do not attract contributions tax. Non-concessional contributions include: Personal contributions where no tax deduction is claimed; Spouse contributions; Government co-contribution; and Excess concessional contributions. Annual Non-Concessional Contribution Caps 2017/2018 Age Non-Concessional Contributions up to 64 $100,000 [1] 65 to 74 $100, & Over Nil Notes [1] Individuals under age 65 at any time in the financial year can bring forward the next 2 years worth of non-concessional caps to enable a cap of $300,000 over three years (for example, you can make a $300,000 non-concessional contribution in year 1, providing you do not make any additional non-concessional contributions in years 2 or 3). If you make superannuation contributions in excess of the above caps, the excess amount will be taxed at the top marginal tax rate plus the Medicare levy. Superannuation Contribution Work Requirements In order to be eligible to contribute to superannuation, you must also satisfy the following work requirements: Superannuation Contribution Work Requirements Age Under 65 Work Requirements No Work Test Must Work 40 Hours Within A 30 Day Period During The Financial Year In Which The Contribution Is Made 75 & Over Only Mandated Superannuation Guarantee (SG) Contributions Allowed Superannuation Guarantee (SG) Contributions The Superannuation Guarantee (SG) scheme requires all employers to provide a minimum level of superannuation support in each financial year for their employees, subject to limited exceptions. Employers who fail to provide the prescribed minimum level of SG support are liable to an SG charge as well as additional penalties. The minimum SG contribution rate is 9.5% of ordinary time earnings. Ordinary time earnings are generally what employees earn for their ordinary hours of work, including: Over-award payments; Commissions; Bonuses; Allowances; and Paid leave. The maximum salary used to calculate SG contributions proposed for the 2017/2018 tax year is $211,040 per year or $52,760 per quarter. Employers are not required to provide SG support to the following exempt employees: Employees paid less than $450 in a month; Employees under 18 years of age who are not working more than 30 hours a week; and Persons paid to do private or domestic work for less than 30 hours a week for a non-business employer.

3 Salary Sacrifice Contributions Salary sacrifice involves forgoing a future entitlement to salary in exchange for additional employer superannuation contributions. Rather than having a portion of your gross salary on which you immediately pay personal income tax paid directly to you, you can negotiate with your employer to contribute an equivalent amount into your superannuation fund. Making salary sacrifice contributions into your superannuation account has the following advantages: Salary sacrifice contributions are a tax effective way to increase your superannuation assets as they are made from your pre-tax salary, therefore allowing a greater proportion of every dollar sacrificed to find its way into the superannuation system; Salary sacrifice contributions are subject to a maximum 15% contributions tax as they enter the fund, so there is an immediate tax saving when compared with paying tax at your marginal rate; The contributions will grow in a tax-advantaged environment; and Salary sacrifice contributions reduce your taxable income and therefore the amount of income tax and Medicare levy payable. Comparisons demonstrate that salary sacrifice contributions are a very tax effective strategy for highincome earners. Personal Concessional Contributions Making a personal concessional contribution to superannuation involves making a contribution to superannuation from pre-tax income for which you claim a tax deduction. This tax deduction can then be used to reduce your tax. This strategy is especially useful for retirees who have left their employment and wish to reduce their income tax and/or capital gains tax liability. You are generally entitled to a tax deduction for contributions made to superannuation if you are eligible to contribute to superannuation. Personal Non-Concessional Contributions Making a personal non-concessional contribution to superannuation involves making a contribution to superannuation from after-tax income for which no deduction is claimed. These contributions are not generally assessable to the fund and do not attract contributions tax. Spouse Contributions Spouses can contribute on each other's behalf to For a spouse aged less than 65, there is no work test requirement in relation to a Fund's ability to accept contributions. For a spouse aged between 65 and 69, the spouse must have been gainfully employed for at least 40 hours in a period of not more than 30 consecutive days during the financial year in which the contributions are made. For a spouse 70 or older, no contribution can be made. The spouse making the contribution can be any age. The spouse making the contribution does not need to be gainfully employed. The Spouse Contribution rebate provides a tax rebate of 18% on up to $3,000 of after tax contributions for a spouse whose assessable income in the relevant tax year is less than $40,000. The maximum rebate of $540 is available where a spouse earns less than $37,000 of assessable income in the relevant tax year. There is no limit to the level of contribution that can be made, however the rebate is limited to the first $3,000 of contributions. The contribution will be treated as a nonconcessional contribution. Government Co-Contribution If you are within certain income brackets, the government is prepared to contribute to your superannuation. However, to be eligible the government requires you to make a personal (after tax) contribution to your superannuation.

4 You will be eligible for the Government Co-Contribution in a year of income if: You make one or more personal superannuation contributions to a complying superannuation fund or a Retirement Savings Account (RSA); Your total income (assessable income plus reportable fringe benefits plus total reportable employer super contributions) is less than $51,813; 10% or more of your total income is from eligible employment or self-employment where you are carrying on a business; You do not hold an eligible temporary resident visa at any time during the year; You lodge an income tax return for the year of income; and You are less than 71 years old at the end of the year of income; You have a Total Superannuation Balance less than the transfer balance cap on 30 June of the year before the relevant year of income; and You have not contributed an amount more than your non-concessional contributions cap for the relevant year of income. The Government Co-Contribution maximum amount payable on an individual s eligible personal nonconcessional superannuation contributions for the 2017/2018 Financial Year is $500 with a reduction of cents for each $1 of income above the threshold. Preservation Whilst the use of superannuation investments will allow you to accumulate retirement assets in an extremely tax effective environment, you must consider the issue of preservation. Any funds contributed to the superannuation environment would become preserved and could not be accessed until you are able to satisfy a condition of release. Superannuation Contribution Splitting Superannuation fund members can split certain superannuation contributions with their spouse. Only 85% of deductible superannuation contributions can be split with a spouse. This is to allow for the 15% contributions tax payable on these contributions. Superannuation contributions can only be split at the end of a financial year, or upon leaving a fund. Existing superannuation balances, or amounts rolled-over into another fund, cannot be split.

5 Your superannuation entitlements may comprise one or more of the following categories of benefits: Preservation s Preservation Preserved Restricted Non- Preserved Unrestricted Non- Preserved Non- Preserved Date of Birth Accessibility Preserved components can be accessed under the following conditions: Attaining your preservation age (refer table below) and retiring from the workforce; or Attaining age 60 and ceasing an arrangement of gainful employment, on or after, you attained age 60; or Attaining age 65; or Permanent incapacity; or Severe financial hardship. Restricted non-preserved components can be accessed under the following conditions: Termination of employment from an employer who has contributed to your superannuation account; or Attaining your preservation age (refer table below) and retiring from the workforce; or Attaining age 60 and ceasing an arrangement of gainful employment, on or after, you attained age 60; or Attaining age 65; or Permanent incapacity; or Severe financial hardship. Unrestricted non-preserved benefits can be accessed at any time (potentially subject to any restrictions in the Fund s trust deed). Benefits can be accessed at any time (potentially subject to any restrictions in the Fund s trust deed). Preservation Age Preservation s 1 July June July June July June July June 1964 On or after 30 June years 57 years 58 years 59 years 60 years Taxation of Superannuation Benefits The following table provides a brief explanation of the components that can form a superannuation benefit, together with their treatment for taxation purposes upon withdrawal from the superannuation environment: Taxation of Superannuation Benefits Over Age 60* Taxation Taxed Untaxed Up to $1,445,000 at 15% Excess at 45% *For all non-zero tax rates, Medicare levy may also apply Before July years

6 Taxation of Superannuation Benefits Preservation Age to Age 59* Taxation Taxed Untaxed 1st $200,000 Excess at 15% 1st $200,000 at 15% Next $1,245,000at 30% Excess at 45% *For all non-zero tax rates, Medicare levy may also apply Taxation of Superannuation Benefits Under Preservation Age* Taxation Taxed Untaxed 20% Up to $1,445,000 at 30% Excess at 45% *For all non-zero tax rates, Medicare levy may also apply Taxation of Superannuation Death Benefits The following table provides a brief explanation of the taxation of lump sum death benefits paid from Taxation of Superannuation Lump Sum Death Benefits* Recipient Taxation Tax Dependants Non Tax Dependants - Taxed 15% Taxation of Superannuation Lump Sum Death Benefits* 30% - Untaxed *For all non-zero tax rates, Medicare levy may also apply The following table provides a brief explanation of the taxation of death benefit income streams paid from superannuation to tax dependents: Taxation of Superannuation Death Benefit Income Streams Age of Deceased Age of Dependant Taxation 60 or Over Any Age Taxed Untaxed Under or Over Under 60 Taxed Untaxed Taxed Untaxed Subject to tax at Marginal Tax Rate with 10% offset Subject to tax at Marginal Tax Rate with 10% offset Tax at Marginal Tax Rate less 15% Tax offset Subject to tax at Marginal Tax Rate Income streams cannot be paid to non-tax dependents from 1 July 2007 unless commenced before this date. In this case they will be taxed as if paid to a tax dependent.

7 Superannuation Risk You should be aware there are various risks associated with Generally, any funds that you contribute to superannuation will be classified as Preserved, and hence cannot be taken in cash or used to commence an income stream, until you reach your preservation age and meet a condition of release, such as declaring yourself permanently retired from the workforce. Depending on the components that make up your superannuation benefits, withdrawing money from superannuation, as a lump sum, before you reach age 60, may result in lump sum tax being payable. Once you withdraw your money from superannuation, you will need to meet superannuation contribution rules if you later decide to put it back in. When you die, the proceeds from your superannuation fund may be subject to lump sum tax, if they are paid as a lump sum to nondependants, as defined for tax purposes. Any binding death benefit nomination you effect can expire after 3 years. The nomination will also cease to be binding on the Trustee should you marry, divorce or enter into or cease a de facto relationship. If you don t have an up to date binding nomination, there is a risk that the Trustee may not pay your benefit to the beneficiary nominated. Your superannuation account balance is not guaranteed. Your balance depends on a variety of factors that will change over the long term. These factors include: - The amounts contributed by you or on your behalf and whether these contributions are regular or in lump sums; - Your asset allocation; - The relative performance of the different assets classes in conjunction with your asset allocation strategy as well as the Australian and international economies generally; - The fees that are charged on your product; - The amounts and costs of any insurance provided through your product; and - Any changes to product features over time and the cost of those features. For those aged 60 and over, superannuation benefits are generally received tax free. An exception to this rule is where benefits are paid from an untaxed source, for example a public sector superannuation fund. For those over age 60, such benefits will generally attract tax of 15% for lump sum withdrawals up to $1,445,000, and 45% on the excess. If taken as an income stream at age 60 or over, the benefit would be taxed at personal tax rates but with a 10% tax offset applying to the taxable income. Please note that for all non-zero tax rates, Medicare levy may also apply. Concessional Contribution Risk You should be aware there are various risks associated with making concessional contributions to To avoid being taxed at penalty tax rates, it is important to make sure that the total of your concessional contributions to superannuation, including Superannuation Guarantee (SG) contributions, salary sacrifice contributions and personal contributions where a tax deduction is claimed, do not exceed the concessional contribution cap: - If you exceed the concessional contribution caps, the excess will be taxed at your marginal rate, plus the Medicare levy. - In providing our advice, we will have taken into consideration this contribution cap. However, if the amount that you are contributing to superannuation increases, for example if you receive a pay increase or contribute a bonus, you should advise us, as you may need to amend the level of your concessional contributions to ensure that you remain under the cap. Where you are using existing assets to make inspecie concessional contributions into superannuation, under law, only certain assets can be acquired by a self-managed superannuation fund from a member of that fund or a related party of that member. Transferring assets that are precluded (for example, residential property already owned by a member), would cause the fund to be in breach of this legislation with potentially significant penalties to

8 both the trustees of the fund and the members themselves. If you are over the age of 65, you will only be able to make contributions if you work 40 hours over 30 consecutive days in the financial year in which the contribution is made. Non-Concessional Contribution Risk You should be aware there are various risks associated with making concessional contributions to To avoid being taxed at penalty tax rates, it is important to make sure that the total of your nonconcessional contributions to superannuation, including personal contributions where no tax deduction is claimed and spouse contributions, do not exceed the contribution caps: - An annual contribution cap of $100,000 applies to non-concessional contributions. - While you are under age 65, this cap can be averaged out over 3 years, to allow for one-off payments of up to $300,000 in the same financial year. - If you contribute more than the $100,000 or $300,000 non-concessional caps, the excess will be taxed at the highest marginal rate, plus the Medicare levy. If you are over the age of 65, you will only be able to make contributions if you work 40 hours over 30 consecutive days in the financial year in which the contribution is made. - If your employer uses the reduced amount that you will be taking as salary for these calculation, then making salary sacrifice contributions may reduce the amount of salary used to calculate how much SG your employer is obliged to pay on your behalf and all other salary linked benefits, such as annual leave and long service leave. - A well-prepared Salary Sacrifice Agreement, including reference to the effect on your SG and all other salary linked benefits, should help to avoid this problem. If you are over the age of 65, you will only be able to make contributions if you work 40 hours over 30 consecutive days in the financial year in which the contribution is made. Salary Sacrifice Risk You should be aware there are various risks associated with making salary sacrifice contributions to You need to confirm whether your employer has a limit on the amount that you are able to salary sacrifice (for example, some employers will not let you use salary sacrifice to reduce your salary to less 30% of your gross salary package). - leave entitlements, on your gross salary package, or the reduced amount that you will be taking as salary