Management
July/August 2003
ª Print
this Page ªClose
this Window
An
overview of the superannuation surcharge
By Geoff Coy, Certified Practising Accountant
ollowing on from the recent article on the superannuation guarantee
levy, accountant Geoff Coy now looks at the impact of the superannuation
surcharge tax on your superannuation contributions.
An overview
of the superannuation surcharge
The superannuation surcharge is an additional tax imposed on superannuation
contributions once your income reaches a certain level. This tax was
introduced in August 1996.
Surchargeable contributions are any contributions for which you have
claimed a tax deduction, as well as any salary sacrifice contributions
you make as either standard or voluntary contributions.
Generally, employer contributions and contributions claimed as a tax
deduction are taxed at 15%. Higher income earners, or those who fail
to supply their super fund with their tax file number, may also be charged
an additional surcharge of up to a 15% on employer contributions or
contributions claimed as a tax deduction.
For the 2002/2003 tax year the surcharge is payable for those on adjusted
taxable incomes exceeding $90,527. The surcharge rate increases to a
maximum of 15% for those on annual incomes exceeding $109,924.
In most instances, adjusted taxable income is usually your taxable
income plus superannuation contributions made to your fund during the
year but can also include fringe benefits from your employer, capital
gains, rent, dividends, interest, pensions, family trust distributions
and any other income you may have.
If the surcharge applies then it is levied on your surchargeable contributions
at a rate of 1% for every $1,295 of ATI over $90,527.
These thresholds are indexed each year by increases in average Australian
wage and salary levels
How Does
the ATO Monitor the surcharge?
Your super fund is required to report surchargeable
contributions received for each member to the Australian Taxation Office
(ATO). The ATO matches this information with your income tax return
to calculate your adjusted taxable income (ATI).
The surcharge thresholds as described above are then used to determine
whether a surcharge liability exists. If you are affected, the ATO will
provide you and your super fund with a notice about your assessment.
Examples
Some examples of surcharge calculations from Con's Convenience Store:
1. Con's wife has a taxable income
from all sources of $50,000 plus surchargeable contributions based
on the super guarantee of $4,500. Her adjusted taxable income is $54,500.
As she is under the threshold of $90,527 there is no surcharge payable.
Her contributions of $4,500 will only be taxed at 15%.
| 2. Con has the
following income for the 2002-2003 year.ccc |
| Salary received from his convenience store business |
$50,000 |
| Rental income from his investment property |
$10,000 |
| Fringe benefits received from his business |
$5,000 |
| Dividends and imputation credits received from his
company |
$10,000 |
| Contributions made under the superannuation guarantee
|
$5,400
|
| Contributions made as a consequence of salary sacrifice |
$20,000 |
| Adjusted Taxable Income |
$100,400 |
Excess over the threshold of $90,527 = $9,873
Surcharge rate based on 1% for every $1,295 of ATI over $90,527 = 7.62%
Con's contributions of $25,400 (5,400 + 20,000) will attract a surcharge
of 7.62% or $1,935 above the 15% already paid in contributions tax.
| 3. Con's brother
Arthur has the following income for the 2002-2003 year. |
| Salary received from his convenience store business
|
$50,000 |
| Taxable retrenchment benefits received from his previous
employer received prior to buying his business |
$20,000 |
| Capital gain arising from the sale of an investment
property |
$20,500 |
| Contributions made under the superannuation guarantee
|
$4,500 |
| Contributions made as a consequence of salary sacrifice |
$15,000 |
| Adjusted Taxable Income |
$110,000 |
As Arthur's ATI has exceeded $109,924.His surcharge rate is capped
at 15%.
His contributions of $19,500 (4,500 + 15,000) will attract a surcharge
of $2,925 above the 15% already paid in contributions tax.
In this instance the capital gain and taxable retrenchment benefit
although 'one off' in nature both contributed in exceeding the surcharge
threshold.
The impact of the other item of income received should have been investigated
by both Con and Arthur and special advice should have been sought with
a view to reducing the impact of the superannuation surcharge.
The Federal government has proposed to reduce the maximum rate of superannuation
contributions and termination payments surcharge to 13.5% for 2002-2003,
12% for 2003-2004 and 10.5% for 2004-2005 and later years.
However, the legislation to implement the reduced maximum rates has
yet to be enacted.
ª Print
this Page ªClose
this Window