This information is for general reference only and is not to be taken as financial/taxation advice. While every effort has been made to maintain current and accurate information, HESTA accepts no responsibility for the currency or accuracy of the material and recommends you contact the relevant authority for more detailed information, and seek independent financial/taxation advice. You can find further information at www.ato.gov.au/super.
Tax file number (TFN) rules
Employers are required to collect and pass on TFNs for employees
Employers must provide the employee’s TFN to their fund where the employee has completed a TFN declaration. This applies to any existing employees who completed a TFN declaration after 1 July 2007 as well as to all new employees. Previously, employers were required to pass on a TFN to a super fund only where the employee had authorised them to provide it to their fund.
The HESTA New member application form also allows new members to quote their TFN.
If you make a super contribution for your employee, you need to pass your employee’s TFN to their super fund within 14 days of receiving their TFN declaration.
If you don’t make a contribution for the employee in that period, you may pass the employee’s TFN on to their super fund when you first make a contribution, after receiving their declaration. This means if you are not obliged to, and you don’t, contribute super for your employee (for example where you pay your employee less than $450 in a calendar month), you would only need to inform the fund of the employee’s TFN when you first make a super contribution.
The Australian Tax Office can monitor whether employers provide the employee’s TFN to the employee’s fund for any TFN declarations completed on or after 1 July 2007
HESTA will also seek to obtain a member’s TFN when it has not been quoted, so that we can accept the member's “after-tax” contributions and ensure that tax on certain contributions to the member’s super account will not increase.
TFNs and privacy
You must respect the privacy of employees who quote their TFN to you. Only accept TFNs from your employees as authorised and:
- accept TFNs given to you by your employees for employment purposes and pass the TFNs on to their super fund.
- collect and hold TFNs in a secure manner—an employee's TFN must not be generally accessible by employees other than those whose duty it is to deal with them in their normal course of work. These people should be made aware of the need to protect the privacy of employees’ TFNs.
- the HESTA New member application form allows members to quote their TFN and advises it will be passed on if they transfer their benefit to another fund (unless they advise otherwise in writing).
- HESTA is required by law to properly safeguard members’ TFNs and intends to use them only for lawful superannuation purposes.
Why it's important to provide TFNs
- Members should submit their TFN to avoid the top marginal tax rate on employer contributions.
- Members who don’t supply their TFN will also be unable to make any after-tax (non-concessional) contributions, making them ineligible to receive any government co-contributions.
- TFNs can also help in locating the super benefits of employees who have lost contact with their super funds.
You’ll find more information on your TFN responsibilities at www.ato.gov.au/super
Important note: failing to meet your TFN responsibilities is a serious offence. Unauthorised use or disclosure of TFNs is an offence under the Taxation Administration Act 1953. Any person affected by such an offence may complain to the Privacy Commissioner (as per the Privacy Act 1988) and, where appropriate, may seek compensation.
Tax offsets
Spouse contributions
A tax offset is available for people who pay super contributions on behalf of a low income (earning less than $13,800 p.a.) or non-working spouse (including a de-facto spouse).
A member's spouse must be earning less than $10,800 per year (assessable income and reportable fringe benefits) for the member to qualify for the maximum offest. The offset is 18% of the first $3,000 of contributions, which means the maximum offset available is $540. The contribution limit reduces by $1 for every $1 of assessable income over $10,800 and cuts out at incomes of $13,800. Both parties must be Australian residents when the contributions are made. A member cannot claim this tax offset for contributions split to the spouse's super account.
Co-contributions
Under the co-contribution scheme, the Federal Government will contribute $1.50 for every $1 that eligible members put into their super as an after-tax contribution (up to a maximum of $1,500 a year for $1,000 of contributions).
PLEASE NOTE: super funds can only accept your after-tax contributions if you have supplied your TFN. Download the TFN form or free call us on 1800 813 327.
The $1,500 maximum co-contribution is available for incomes (assessable income plus reportable fringe benefits) up to $30,342 (for 2007/8) reducing by 5 cents for each dollar of income up to $60,342.
The income thresholds are indexed on an annual basis.
PLEASE NOTE: if you are self employed and make after-tax super contributions, you may receive a super co-contribution providing you satisfy the eligibility requirements. For more details visit www.ato.gov.au/super
Tax deductions
Self-employed
Contributions from members who are self-employed or substantially self-employed (i.e. earn no more than 10% of assessable income, including fringe benefits, as an employee) can claim a tax deduction on some of thier contributions. Tax deductions reduce the income on which tax is calculated. Members who want to claim a tax deduction for a super contribution must notify their fund by the time they lodge their tax return, or by the end of the following financial year after the contribution was made (whichever date is earlier).
From 1 July 2007, concessional (tax deductible) contributions from self-employed members are subject to 15% tax, paid from their account. Concessional contributions in excess of government limits (see below) will be taxed at an additional 31.5% (plus Medicare Levy).
Note: the government has eliminated aged-based limits on deductible contributions. Employers can now claim a full deduction for all contributions on behalf of employees aged less than 75.
Limits on contributions
Concessional contributions
A limit of $50,000 per year (indexed) generally applies to concessional contribution (usually those made by an employer). A transitional period applies until 30 June 2012 for people aged 50 or over, who can contribute up to $100,000 without exceeding the cap. Contributions over the cap will be taxed at the top marginal rate (plus Medicare Levy). If you have more than one fund, all concessional contributions made to all your funds are added together and count towards the cap.
Non-concessional contributions
Personal contributions that are not tax deductible (known as non-concessional) are limited to $150,000 per year. People under age 65 can bring forward two years of contributions and make a larger contribution of $450,000. HESTA can’t accept contributions over that cap. Members who make contributions over the cap because they contribute to more than one fund will be taxed at the top marginal rate (plus Medicare Levy) on the excess contributions. The non-concessional contributions cap will always be three times the concessional contributions cap.
The ATO will have only limited powers to reduce tax payable on excess contributions made inadvertently.
You can find further information at www.ato.gov.au
Contributions tax
A 15% federal contributions tax on employer contributions (including salary sacrifice contributions) is deducted from members’ accounts. HESTA calculates this on net contributions after deducting its administration fee and any disability and death insurance premiums that apply.
After-tax contributions are not subject to contributions tax. Self-employed members may claim a tax deduction on certain contributions, but those contributions are then subject to 15% tax and may affect any tax on the end benefit.
Investment tax
HESTA is required to pay 15% tax on any investment income earned. Most Australian capital gains are taxed at a discounted rate of 10%. Imputation tax credits on any share dividends may reduce the actual tax rate further. HESTA allows for investment tax before declaring interest rates.
GST
GST does not apply to super contributions, rollovers, interest applied to members' accounts or benefits paid. However, GST does affect HESTA's operating costs.
Employer Termination Payments (ETP)
In limited circumstances, employees can roll certain Employment Termination Payments (ETPs) into their super.
An ETP is a lump sum payment made in consequence of the termination of employment. ETPs can only be rolled in if they are specified in existing employment contracts (as at 9 May 2006) and are paid in before 1 July 2012.
For more details on ETPs and other termination payments visit www.ato.gov.au