Ask Peter Scott

Do you have a question about superannuation?

First Super’s Superannuation Specialist, Peter Scott has the answers. Email Peter and he will respond to selected questions in the next issue.

Peter has more than 35 years’ experience in the financial services industry. His knowledge, integrity and enthusiasm have helped thousands of people map out their financial objectives – and resolve financial concerns.

If you require a more personalised service, Peter can visit your worksite to explain in more detail the benefits of First Super’s allocated pension and transition to retirement offerings.

Peter’s qualifications include a Diploma of Financial Planning, Diploma of Financial Services and Certificate IV in Workplace Training and Assessment. Peter is an authorised representative of First Super Pty Ltd, authorization number: 296928.

 

Q. I’m about to file for divorce, what do I need to do with my super?

Superannuation is treated just like any other asset of a marriage or de facto relationship (of at least two years duration or where the de facto couple have a child, and that includes same sex couples). And just like other assets, superannuation can be divided between the divorcing or separating parties.

If the split is amicable, couples can negotiate around the amount in the superannuation fund, treating the value of the fund in question as an amount that can be balanced against other assets, like the house if one person needs to stay in the marital home (for example to care for children).

The Family Court

The Family Court can order how superannuation should be split, and in what proportions, in some cases the split may not always be 50:50.

Dividing the super fund can see one portion rolled over to another account in the same fund in the name of the “non-member spouse” (as the Tax Office puts it) or transferred to another fund altogether. The tax-free and taxable components are determined and proportionally split between the two.

Accessing the Split Superannuation Accounts

Your preserved superannuation benefits must remain in the superannuation system unless the individual entitled to the benefit has satisfied a condition of release. If you have not satisfied a condition of release, then you cannot access your super benefits.

You should seek professional advice in relation to the above matters.

 

Q. I am 55 years of age and currently earn $1,200 per week, I would like to increase my superannuation account and I have been told that Superannuation Salary Sacrifice could meet my needs, could you please tell me how Superannuation Salary Sacrifice works?

Superannuation Salary Sacrifice is an efficient method of contributing to your superannuation fund, however, there are some rules you will need to be aware of.

Firstly, let me explain superannuation salary sacrifice?

Salary sacrifice is an arrangement with your employer to make additional superannuation contributions from your pre-tax salary. Your employer makes the payments on your behalf, and they are taxed at 15% instead of at your nominal tax rate.

What are the benefits?

Under an ‘effective’ superannuation salary sacrifice arrangement:

• As an employee, you can increase your superannuation benefits and reduce your assessable income by an amount similar to the sacrificed amount, and
• Your employer can obtain a tax deduction for the increased superannuation contributions, which means that the employer’s after tax position is the same either way.

What are the rules?

• The agreement with your employer can only relate to future wage payments, (ie. it cannot be retrospective).
• All the terms of the salary sacrifice arrangement should be clearly documented.
• The salary sacrifice arrangement must be entered into before you are entitled to payment of the wages.
• The wages being sacrificed must be permanently foregone.

What are some of the implications of my salary sacrifice arrangement?

• Income Tax Assessment

The salary sacrificed component is not assessable income for taxation purposes, so it is not included on your payment summary and is not subject to pay as you go (PAYG) withholding tax. The reduced salary amount specified in a salary sacrifice arrangement becomes your assessable income for taxation purposes and should appear on the payment summary your employer gives you.

However, your employer must include the Superannuation Salary Sacrifice on your PAYG payment Summary for the financial year as ‘Reportable Employer Super Contributions’, you must then include this detail in your Tax Return.

• Superannuation guarantee

The salary sacrificed contributions are paid as employer contributions to your superannuation fund. They then can count towards the 9.50% employer contributions required to meet the superannuation guarantee requirements. Your salary sacrifice could reduce or eliminate the amount of employer contributions required to be paid by your employer on your behalf.

For this reason it is advisable for all the terms of the arrangement to be fully and clearly documented to ensure this does not happen.

You should be aware that contributions will be taxed within your superannuation fund – the rate is generally 15%.

How much of my salary or wages can I sacrifice?

There is no limit on the benefits that you can sacrifice, however, your Employer’s Superannuation Guarantee Contribution and your Salary Sacrifice contribution must not exceed the concessional contribution limits (currently $35,000 during the 2015/16 financial year for employees aged 50 years or over). If exceeded, they can attract additional tax and charges.

How would a $100 weekly superannuation salary sacrifice arrangement work in relation to your net income and superannuation fund?

Income:
Current weekly wage	$1,200	$1,200
Less Salary Sacrifice	Nil	$100
Reduced Wage	$1,200	$1,100
Estimated Tax and Medicare Levy*	$251	$215
Net Wage	$949	$885

*2015/16 personal tax rates

The example shows that your $100 salary sacrifice arrangement only reduces your take home pay by $64, resulting in a tax saving of approximately $36.

 

Superannuation Account:
2015/16 Weekly Superannuation Guarantee	$114	$114
Superannuation Salary Sacrifice	Nil	$100
Total Weekly Contributions	$114	$214
Less 15% Superannuation Contributions Tax	$17.10	$32.10
Net Superannuation Benefit	$96.90	$181.90

The example shows that your superannuation account will increase by $85 under this arrangement.

You should seek the appropriate advice if you are considering a Superannuation Salary Sacrifice arrangement.

 

 

This publication was issued by First Super Pty Ltd (ABN 42 053 498 472, AFSL 223988), as Trustee of the First Super superannuation fund (ABN 56 286 625 181). It does not consider your personal circumstances and may not be relied on as investment advice. Content was accurate at the date of issue, but may subsequently change. You should contact us on 1300 360 988 for updated information and to obtain a copy of the product Disclosure Statement.