Tag: Superannuation

Superannuation complaints up

Jocelyn Furlan, Acting Chairperson of the Superannuation Complaints Tribunal, has reported a significant increase in the number of complaints received by the Tribunal.

In the June 2008 quarter, complaints were up by 23.6% when compared to the same quarter in 2007.

The number of complaints within jurisdiction relating to fund administration continues to rise as a percentage of total complaints received and now comprises the largest category of complaints. Complaints about delays in rollovers or benefit payments and investment option changes comprised over 27%, and disputes regarding account balances representing a quarter of administration complaints.

Ms Furlan said that whilst this increase may or may not be a direct result of negative investment returns, in a falling market trustees should review any undertakings given in relation to the processing time for benefit payments, rollovers, investment switches and other transactions impacting on the member’s account balance.

Falling markets may have implications for death benefit payments.

The Tribunal encourages trustees to review their policies regarding the investment of pending death benefit payments (and any insurance proceeds) during the period of the claim staking process (and resolution of a dispute by the Tribunal if a complaint is lodged) and ensure that this has been disclosed to members.

An explanation to the potential beneficiaries/legal personal representatives of how the account will be invested during the period between confirmation of death and the payment of the death benefit may help to reduce the number of complaints to the Tribunal about any unexpected change in the value of the benefit. The Tribunal is aware that some funds have adopted the policy that any investment choice in place at the date of death continues until the benefit is paid. The Tribunal has received complaints that the trustee will not accept a request to change the investment option, on the basis that, in the Trustee’s view, no one (including a surviving spouse or a legal personal representative of the deceased member’s estate) is authorised to request such a change.

The tribunal has now merged with the Banking Industry ombudsman to form the Financial Ombudsman Service.

Year End Superannuation Strategies

This is what may still be available.

Last Minute Contributions

There are two types of contributions that can be made to superannuation – concessional and non-concessional contributions. Concessional contributions to super are those which are eligible for a tax deduction. These include employer contributions, Superannuation Guarantee contributions and salary sacrifice contributions. For anyone younger than age 50 the concessional contributions cap is $50,000 and for anyone age 50 and above it is $100,000.

Non-concessional contributions are personal contributions, spouse contributions and child contributions for which no tax deduction has been claimed. The non-concessional contributions cap is $150,000, however, for anyone under age 65 it is possible to make non-concessional contributions of up to $450,000 over a three year set period. Any concessional and non-concessional contributions which are in excess of the cap are taxed at penalty rates.

Don’t forget that once you reach age 65 contributions can only be made to superannuation if you meet the work test of 40 hours within 30 consecutive days during the financial year. Once you reach age 75 contributions cannot be made to superannuation as a general rule.

Contributions to self managed funds can be made in cash or via in-specie contributions of certain property, listed and non-listed investments. Don’t forget there may be capital gains tax and stamp duty implications relating to the transfer to take into consideration.

Salary Sacrifice

Salary sacrifice is a great way of making tax effective contributions to superannuation. Remember that these agreements need to be made in advance and 1 July is not that far away so planning your salary sacrifice to superannuation now is a good strategy. Talk to your employer to see whether salary sacrifice is available and how much of your income can be salary sacrificed.

Co-contribution

For anyone who earns less than $58,980 making an after tax contribution to superannuation can have a number of advantages if they qualify for the co-contribution.

The main qualification is that you must be under 71 and at least 10% of your total income must be earned from salary and reportable fringe benefits and make an after tax contribution to superannuation of at least $1,000 during the year.

The maximum amount of the co-contribution is $1,500 if you earn less than $28,980. Once you earn more than $28,980 the co-contribution reduces by $0.05 per additional dollar of income and cuts out when you earn $58,980 or more.

If you have children who have just commenced working the co-contribution may provide an incentive to introduce them to superannuation if they earn less than the maximum income threshold of $58,980.

Personal Tax Deductible Contributions

What many people don’t know is that they may be eligible to claim a tax deductible personal superannuation contribution where they are not working or earn a small amount from employment. This is available to people who are self-employed, anyone who earns most of their income from investments or as a pension.

Providing you earn less than 10% of your income and reportable fringe benefits from employment then you may qualify. Until 30 June the amount you can claim as a tax deduction depends on your age. If you are under age 50 the maximum amount taxed at concessional rates is $50,000 and if you are 50 or older it is $100,000. Don’t forget once you reach age 65 you need to meet certain work tests if you wish to contribute to super,

Contributions Splitting with Your Spouse

This can be an attractive financial planning strategy as the superannuation rules allow you to split your contributions with your spouse.

The amount that can be split depends on the type of contribution and when it was made. To split the contribution you need to apply in the financial year after the contribution was made.

Spouse Contributions to Super

For those who have a spouse who earn less than $10,800 making a contribution of up to $3,000 can have some tax advantages. By making an after tax contribution to superannuation for your spouse you can receive a tax offset (rebate) of up to $540. This offset (rebate) reduces down to $0 once your spouse earns greater then $13,800.

Combining Your Superannuation Benefits Before 1 July

Prior to 1 July you may find it useful to combine your superannuation benefits if you have an amount in at least one fund that relates to your membership or employment as far back as June 1983. The reason is that by combining your superannuation benefits you may end up with a greater tax free amount from super. This is important if you will be taking a superannuation benefit prior to reaching 60 or for any death benefits from superannuation to ‘non-dependants’.

Of course, it can be worthwhile to combine your superannuation benefits at anytime to reduce the costs of keeping your money in super.

Tax File Numbers

It is important that your superannuation fund has a record of your tax file number. The reason is that if the fund does not have your tax file number it may deduct tax of 46.5% from the contribution made on your behalf. Also, without your tax file number it is not allowed to accept contributions made by you from after tax amounts. This will mean less in your superannuation account and you may miss out on the generous concessions available.

Thanks to Superconcepts for this summarywww.superconcepts.com.au

Super Clearing House to (try to) Slash Business Red Tape

I’m pretty skeptical every politician promises to “slash red tape”. This particular item is something I recall asking for years ago so I hope it comes off.

As a part of the budget previews last week the minister of superannuation made the following announcement (I have edited out the bits where he praises his government and criticises the previous one):

The Rudd Government will provide funding of $16 million over three years to set up an optional superannuation clearing house facility to cut the red tape burden on businesses across Australia, Senator the Hon Nick Sherry, Minister for Superannuation and Corporate Law, said today.

“With the introduction of super fund choice, businesses can be required to make compulsory superannuation contributions into numerous funds, potentially imposing a significant burden of paperwork and time, especially on small businesses.

Where employees can choose their own superannuation fund from the many hundreds available, an employer may be required to pay superannuation into a large number of different funds, a process that can be highly onerous.

A superannuation clearing house will allow an employer to pay their contributions to a single location. The clearing house will then distribute them to the relevant superannuation funds as selected by their employees.

“The optional clearing house facility will manage employers’ obligations under Superannuation Choice, including the time consuming task of checking details entered on the Choice form and distribution of contributions to the nominated funds,” Minister Sherry said.

“For small businesses we’re not just reducing red tape but we’re also making sure that no new costs are imposed as the clearing house facility will be offered free of charge to businesses with less than 20 employees,” said Minister Sherry.

Businesses that use the clearing house facility will have their legal obligation to make superannuation contributions discharged when payment of the correct amount is made to the clearing house. The facility will be available from 1 July 2009.

The Government will consult with industry prior to implementing this measure.