Are You At Risk Of Unpaid Super?

Do you trust that your employer is paying you the right amount of superannuation just because it says so on your payslip?

Every year, thousands of employers fail to pay their staff the correct amount of superannuation, costing those workers billions of dollars every year. In many instances, it’s an honest mistake and easily rectified. However, some malicious employers may be looking to avoid having to pay you the correct super guarantee.

You may not have realised it either if you trust the information on your payslip is correct.

What Am I Supposed To Receive? 

From 1 July 2022 to 30 June 2023, the superannuation guarantee rate has been 10.5% of your income. From 1 July 2023 to 30 June 2024, the superannuation guarantee rate will be 11%.

Your employer must make regular payments to your superannuation fund.

How Do I Check?

Checking for unpaid superannuation is very simple. You can:

  • Call your superannuation fund directly or
  • Check your statement online

If you are unsure of the amount of superannuation owed, you can also contact the Australian Taxation Office (ATO) to chase down the unpaid superannuation. They will be able to determine if an offence has been committed and will be able to punish them.

However, if a company is going through insolvency proceedings and you haven’t been paid superannuation, it can get a little more tricky. The ATO in this instance won’t pursue the unpaid super, but you yourself will be able to legally pursue the company directors in court.

Are You Eligible To Opt Out Of The Super Guarantee?

Were you aware that, if you meet certain conditions, you may not have to receive the super guarantee from some of your employers?

From 1 January 2020, eligible individuals with multiple jobs have been able to apply to opt out of receiving a super guarantee (SG) from some of their employers.

You may be eligible to apply if you:

  • have more than one employer and
  • expect that your employers’ mandatory concessional super contributions will exceed your concessional contributions cap for a financial year.

Eligible employees can apply for the super guarantee shortfall exemption certificate when they complete the Super guarantee opt-out for high-income earners with multiple employers form (NAT 75067).

When you opt out of SG contributions, you must still receive SGC from at least one employer. If other employers agree to use the SG exemption, then they may provide an alternative remuneration package instead so as not to be disadvantaged.

However, the exemption certificate:

  • Does not restrict the employer from making super contributions on behalf of the employee.
  • Does not change the employer’s obligations or an employer’s agreement with their super fund.Cannot be varied or revoked once issued.

The exemption certificate means the employer will not be liable for the super guarantee charge (SGC) if they don’t make SG contributions on your behalf for the quarters covered by the certificate. You must talk to your employer before applying, as they can choose to disregard an exemption certificate and continue to make SG contributions.

This measure may not benefit everyone eligible. Consider your employment arrangements, such as how your pay and other entitlements may change and the effect of any relevant award or workplace agreement applicable to you to determine if this measure will benefit you.

As your accountant or tax agent, we may be able to provide further advice based on your circumstances, so why not speak with us?

A How-To Guide For Winding Up An SMSF

If you’re a trustee of a self-managed super fund, some reasons or circumstances could have emerged that may result in you wanting to get out of that fund.

These may be personal circumstances (such as a divorce or another trustee dying), financial reasons (investments not performing as they should or you aren’t taking a pension after retiring) or you simply may not have the time to manage it efficiently anymore.

Whatever the reason, getting out of a self-managed super fund is no easy task. An SMSF cannot simply be placed ‘on hold’ as it were, as an SMSF must be completely closed down (unless members are remaining). You cannot simply take your funds out of the SMSF, especially if it is in the name of multiple trustees.

Getting out of your SMSF can be a complex process, with a lot of paperwork and responsibilities you must ensure are met. Failing to meet those responsibilities as a trustee, even when winding up your SMSF, could lead to financial and legal ramifications (such as penalties and fines).

Though some of the steps for winding up an SMSF might be self-explanatory, ensure you cover your bases by ensuring that the following steps are followed.

Consent Of Trustees Must Be Obtained

As with most decisions that are to do with an SMSF, consent from the fund’s trustees must be obtained in writing at a trustee meeting. A resolution that the SMSF is to be wound up is to be made and all trustees need to agree to it. This must be minuted and signed by all trustees.

After this consent is obtained, the Australian Taxation Office (ATO) must be notified of the fund being wound up within 28 days of the decision being made.

Check Your Trust Deed

This may contain instructions or information pertaining to how your SMSF needs to be wound up and the specific steps that need to be taken. Work Out What Will Happen To Member

Benefits

An SMSF can only be closed when there are no funds available, so any existing monies within the account need to be paid out to members who are able to access their super (if they have met a condition of release) or rolled over to another super fund.

You also need to take into consideration events that may affect other members’ transfer balance accounts (which may need to be reported by the SMSF).

Paying Out The Fund to members

If members are still in the accumulation phase, they need to rollover their funds into another super fund. This can be any kind of super fund – such as industry and retail funds – and doesn’t need to be another SMSF. You also need to take into account if any of the assets within the SMSF will incur Capital Gains Tax if they are sold to fund member benefits payouts.

Appoint An Auditor

Appoint an auditor to complete a final audit of the SMSF before you lodge your final tax return. They must be ASIC approved. The audit will help you to finalise the tax obligations of the fund, including CGT and taxable income received by the fund through investment returns or member contributions.

The ATO will then examine the audited accounts and determine whether there are any final tax obligations or refunds due. Any final tax owed can be paid from funds remaining in the SMSF’s accounts.

Approval By The ATO For The Fund To Close

Finally, the ATO will send you a letter stating that your SMSF’s ABN has been cancelled and your SMSF’s record has been closed on the ATO’s system. This letter confirms that you have met all reporting and tax responsibilities, and you can now close the fund’s bank accounts.

Closing an SMSF is a complex task; you should not attempt to do it alone. Please reach out to a licensed adviser if this is something you are contemplating.

Superannuation, Divorce, & Your Options

A relationship breakdown can be a messy, frustrating time fraught with plenty of paperwork. Did you know that your or your partner’s super could be affected?

If you were to split up with your current partner, you may be able to file a legal claim for up to half your superannuation (under certain circumstances).

In all states (bar Western Australia), you don’t need to be married, have kids or even own a house together for your super to be split in a relationship breakdown. The superannuation of both partners is included in the pool of assets to be divided upon the separation.

According to the Federal Attorney General’s website, superannuation can be split either by:

  • an order of the Federal Circuit and Family Court of Australia (or Family Court of Western Australia for married couples in Western Australia); or
  • a superannuation agreement (a financial agreement that deals with a superannuation interest).

The Family Law Act 1975 gives the Family Court the power to deal with the superannuation interests of spouses (including de facto spouses). Superannuation cannot be taken as a cash payment and is usually rolled over to the recipient’s own superannuation account.

These laws were designed to tackle the longstanding issue where one person in a relationship – usually a woman – would have a tiny amount of super relative to her partner.

You don’t have to be married to split your assets potentially.

It applies if you have a child together or have been in a de facto relationship for at least two years. The definition of a de facto relationship under section 4AA of the Family Law Act 1975 is based on whether you were living together in a genuine domestic relationship.

Remember that any split isn’t necessarily half-half.

You can enter into an agreement without going to court, but if you do end up in court, the judge will consider the relevant circumstances, including whether you have kids, direct and indirect financial contributions to the relationship, and the ongoing needs of each party.

Can Minors Have A Superannuation Fund?

You’re likely aware that people can put money into their super until they reach 67 years and probably already do so yourself.

But did you know you can put money into your underage children’s superannuation for them if they are under 18?

Superannuation For Minors

Some superannuation fund providers can have special accounts that can be opened for children under 18.

One of the advantages of doing this early on is that money will accrue in the fund until your child reaches their preservation age, which will help them with their retirement.

Additionally, the compound interest that superannuation funds with as little as $5,000, for example, accumulating at 7% per annum until the child reaches their preservation age, could increase exponentially.

Compound interest on these superannuation funds could assist them year after year with increased gains and profit.

With that previous example of a child’s superannuation fund of $5,000, if that amount of money accrued interest at the 7% per annum interest rate over 55 years, the result could be that that amount in the super fund may total over $200,000.

This idea is not always suited for everyone. The funds to start the super account need to be readily available, and for many people, that might not be an option. If the money is available through other investment opportunities (i.e. a grandparent wishing to leave their grandchildren money), this could be a means through which that money is tucked away, ready for their superannuation.

If you’re looking for a way for your children or grandchildren to be looked after when you are not around, investing in superannuation is an intelligent way to look towards the future.

What About Adult Children? 

After they commence work, adult children should have a superannuation fund established already (through which their employer contributions can be funnelled). However, you might consider adding them to your self-managed super fund as an additional member or trustee.

There are a variety of issues to think about before including adult children in a self-managed super fund.

There are financial benefits to including children in a super fund, such as the increased pool of assets created over time that can allow for greater diversification of assets. Many people may invite their children to join their super fund as it allows them to provide their children with a financial education on how to manage money and appreciate the benefits of super.

For example, adding adult children means the super fund must cater to a wider range of ages, which can present challenges for parties with different needs.

Also, all members of an SMSF fund with a corporate trustee are expected to be actively involved directors of the fund. This means that your children will also be expected to be directors of the fund and will, therefore, play an important role in the fund’s decision-making. Although the children may be happy to leave the fund’s investment arrangements as they are, will they be in the future when their circumstances may change?

The handling of situations listed above should be mapped out before children are invited to join the super fund to avoid arguments or confusion.

Seek further information and advice from your accountant about what we can do for you to get this started.

Receiving Income Through Your SMSF As A Pensioner

One of the best ways to ensure regular, flexible and tax-effective income as a pensioner is through an income stream from your SMSF.

As a member, you can receive an income stream in a reoccurring series of benefit payments from your SMSF.

Income streams from an SMSF are usually account-based, which means that the amount allocated to the pension comes directly from a member’s account. Once an account-based pension commences, there is an ongoing requirement for the trustees of the superannuation fund to ensure the pension standards and laws are met.

Standards that must be met for SMSFs to pay income stream pensions are that:

  • The minimum amount must be paid at least once a year.
  • Once the pension has started, the capital supporting the pension cannot be increased by using contributions or rollover amounts.
  • When a member dies, their pension can only be transferred to a dependent beneficiary if they have any.
  • The capital value of the pension or the income cannot be used as security for borrowing.
  • Before completely changing a pension, you must pay a minimum amount in certain circumstances.
  • Before you partially change a pension, you must ensure sufficient assets to pay the minimum amount.

Once they have satisfied these minimum standards, the pension will be treated as super income stream benefits for tax purposes. The funds may then be able to claim an exemption for the income earned on pension assets. This is known as an exempt current pension income (ECPI).

SMSF trustees may need to amend fund trust deeds to meet the minimum pension standards. You should consult a legal adviser for more information on how to do this.

Records must be kept of pension value at commencement, taxable elements of the pension at commencement, earnings from assets that support the pension and any pension payments made.

New Rate Of Tax Concession For Super Balances Over $3 Million.

Last week, the government announced a change to superannuation, introducing a new tax that will apply to member balances above $3 million.

From July 1, 2025, super earnings over $3 million will be taxed at 30 per cent, double the current rate of 15 per cent. According to the government, this change aims to ensure that sustainability and fairness remain central to the system.

To put it into perspective, the average Australian super fund contains an average balance of $150,000, and about two-thirds of Australians have less than $100,000.

This new tax concession increase will affect about 80,000 people, who will continue to have more generous tax breaks on earnings from the $3 million below the threshold (which will not rise over time). This will not be retrospectively applied and will only apply to future earnings.

A person with $3 million in super will likely receive a tax benefit at 30% still. However, serious thought could be given to leaving money in superannuation, where the tax rate is the same as putting it into a company.

Other considerations that may need to be thought through include

  • If you die and leave that super to non-death benefits dependent, they will pay 15% on the entire taxable component, leading to an effective tax rate of 45% on the earnings.
  • Taking money out of the company will come with franking credits but may put you in a position of paying top-up tax. Conversely, leaving it in the company and leaving the shares to a testamentary trust may allow you to pay dividends without further tax.
  • A company does not need to comply with any SIS rules so that you can have in-house assets, loans to members etc.

Any actions taken should be done with consultation with a professional adviser to comply with legislation and regulations.

As these changes to super balances of over $3 million will not take effect until after the next election, there is plenty of time to plan and model out the best path for your situation (if you are one of the few who this will affect). You will need an actuarial certificate to determine what percentage of the fund’s income will be taxed at 0%, 15% and 30%.

While the average Australian super fund may be far below this threshold, that doesn’t mean a fund cannot be increased. Through voluntary contributions, including concessional and non-concessional contributions, you can help to boost your nest egg to a comfortable level.

Do you want to know more about tax breaks, concessions, or ways you could contribute to your superannuation? Speaking with a licensed professional is the best way to start.

Why Do People Salary-Sacrifice Into Super?

Salary sacrifice is one of the most effective ways to add to your super balance. Salary sacrifice involves the employee agreeing to exchange a portion of their salary (before tax) for an increase in superannuation contribution by their employer.

Contributions made through salary sacrifice are classified as employer contributions, no employee contributions.

These are taxed at a maximum of 15% (if you earn under $250,000 per year) which is lower than the marginal tax rate most employees are charged. The amount you ‘sacrifice’ cannot be assessed for taxation purposes, i.e. it is not subject to PAYG.

Employees should ensure that their contributions per year are not above $25,000 as this is the cap on concessional contributions and will require additional tax to be paid if surpassed.

Salary sacrifice is an effective way to minimise tax liability and increase super contributions if individuals earn more than they require for annual expenses.

After beginning the salary-sacrificing process, employees should look for two important matters. First, the calculation of ordinary time earnings by your employer that super applies to, does not change. Second, the amount paid to your super through the salary sacrifice agreement does not contribute towards any super guarantee contributions that are required of your employer. Employees should verify that neither occurs and verify any confusion with their employer.

Salary sacrifice is a trade-off between income earned in the present, and contributions made for the future. Employees may experience difficulty finding a balance that suits them or considering different aspects of their finances for the agreement with their employer. Asking for professional assistance to determine specifications for the agreement could help simplify this procedure.

Are You Paying For Super Fund Fees You Don’t Need To?

No matter the kind of super fund you opt for, or how it has been performing, you will be subject to super fees. Understanding how these fees work and the difference they can make to your nest egg is vital.

When it comes to super fund fees, there are two factors you need to get your head around; the kinds of fees you are being charged and the rate of fees you pay. Opting for a super fund based on these two factors can see you retire with hundreds of thousands of more money.

You should be aware of the various types of fees you are being charged. If you would like to find out the fees you are being charged, you should do two things.

Firstly, Google your fund’s product disclosure statement and scroll through to the fees section. You should see a list of different types of fees, explaining what they are, how they are applied, and how often they will be incurred. Secondly, you should log in to your super fund account and note all the fees being charged to you. Investigate how closely these correspond and correlate with the product disclosure statement.

If you feel there are discrepancies, do not hesitate to contact your super fund or financial advisor and ask for clarification. It is worthwhile researching and comparing the fees you are being charged against other super funds and what they charge. Being complacent and not paying attention to your super is extremely irresponsible; the dividends you will receive later in life for being diligent now outweigh the burden of taking time to be informed today.

Some standard fees across the board include:

–        Administration fees: fees covering the costs of operating and managing your super fund account.

–        Exit fees: fees incurred for leaving or switching super funds. While this is a common fee, not all funds charge it.

–        Investment fees: fees incurred due to the cost of managing where your money is invested. These fees can fluctuate, depending on where your money is invested.

–        Activity-based fees: fees incurred for any activity you require your super fund to perform outside of the ordinary management of your account, such as a family law split fee.

Another major factor contributing to how much you accumulate in your super account throughout your working life is the rate of fees you pay. Plain and simple, some funds offer much lower fees than others, creating a difference of hundreds of thousands of dollars when it comes time to retire.

Generally, funds are categorised into three groups; low super fees, medium super fees and high super fees. You will need to weigh up your options and decide whether you want a fund that charges low, medium or high super fees. While it seems like the best option to choose a fund with low super fees, these funds do not necessarily perform as well as medium or high-fee super funds, meaning you will not get as good of a return on your investment.

When Can I Access Superannuation Early?

Accessing your superannuation early is a short-term strategy Australians facing financial troubles can use to buy temporary financial protection.

However, there are limited circumstances when individuals can access their super savings early, and in most cases, individuals cannot withdraw their superannuation until they reach their preservation age and retire.

To access super early, Australians must first satisfy a condition of release, which allows immediate access to an individual’s preserved benefits, provided the rules of their fund allows early super withdrawals. Some conditions of release include, but are not limited to:

Retirement

This is the most common condition of release. Super funds usually require a retirement declaration verifying that an individual has retired.

Reaching Preservation Age

As soon as an individual reaches their preservation age they can withdraw their entire superannuation benefit, even if they haven’t retired (and don’t plan to retire) from the workforce.

Starting A Transition-to-retirement Pension

Individuals can access a portion of their benefits each year by starting a super pension without retiring. This only works, however, if an individual has reached their preservation age and withdraws less than 10 per cent of the account balance each year.

Severe Financial Hardship

Individuals can get some of their superannuation back if they satisfy the conditions that constitute the government’s view of ‘severe financial hardship’.

Compassionate grounds

If an individual suffers from a life-threatening illness or has fallen behind in overdue loan repayments before retiring, their super fund can release part or all of their preserved benefits. Individuals can also apply for early release of superannuation on compassionate grounds to pay for funeral or medical expenses, or palliative care.

Permanent Disability or Incapacity

If an individual suffers from a chronic illness or serious disability, they may be able to claim on a total and permanent disability insurance policy. Individuals should check with their super fund first for the terms and conditions of insurance policies. Individuals may also access super benefits early if they suffer ‘permanent incapacity’.

Temporary Incapacity

An individual’s super fund may automatically provide income protection insurance, or an individual may be able to apply for such insurance via the superannuation fund. Those who suffer from a prolonged illness or disability can access this insurance coverage and receive a regular income for up to two years.