The Law Handbook 2024

408 NOTE The law in this chapter is current as at 1 September 2023. Superannuation schemes Introduction The federal government encourages people to save for retirement in a variety of ways. Mainly, the government gives superannuation tax concessions. There are three points at which tax is important to your superannuation: when money goes into the fund, while it is there, and when it comes out. Money contributed to superannuation can be taxed at 15 per cent (or effectively 0 per cent, if the contributor earns $37000 or less and qualifies for the low-income super tax offset, which is a maximum of $500), or 30 per cent if the contributor earns over $250000, but it can also gain the contributor a tax benefit. Money in a superannuation fund can make income and capital gains that are taxed at concessional rates while the fund has not yet started to pay a benefit, but are not taxed, up to a maximum of $1 . 9 million (ignoring investment gains or losses), after the fund has started to pay a benefit. Money that comes out of the fund is not taxed, unless the money comes out before the beneficiary has turned 60 years of age, in which case a benefit for which a tax deduction has been claimed is taxed but with a 15 per cent offset (or 10 per cent if the contribution was untaxed). There may also be tax free components of a lump sum and a low rate cap concession that reduce tax on lump sums taken below age 60. Superannuation income is not treated as income for tax purposes, meaning that other earned income benefits from a lower marginal rate. The general explanations below are subject to a variety of exceptions, particularly in relation to definedbenefit schemes, public sector superannuation schemes, and disability income streams. What is a superannuation trust? Virtually all private sector superannuation schemes in Australia are organised through the legal device of a trust. A trust is a form of ownership of property in which one person (the trustee) is the legal owner of the property, but is under a legal obligation to use the property exclusively for the benefit of another person (the beneficiary). In the case of a superannuation trust, the rights and obligations of the trustee and beneficiaries (often called ‘members’) are set out in a document called a ‘trust deed’. The trustee of a superannuation fund may be a company or one or more individual people. Some commercial organisations act as trustees for a large number of employers under a single trust deed. Some public sector superannuation schemes are not set up as trusts. The rights of members of these schemes depend on the legislation governing them. The legal principles governing the law of trusts were developed in cases concerning trustees who administered, without payment, sums of money made available to the beneficiaries through gifts and wills. As will be apparent from this chapter, these principles are, arguably, inappropriate to determine the rights of members of modern superannuation schemes, where the benefits are provided in a commercial context, frequently in substitution for wages under awards and contracts of employment. Superannuation contributions Superannuation guarantee Under the Superannuation Guarantee (Administration) Act 1992 (Cth), employers must contribute 11 per cent of ‘ordinary time earnings’ as superannuation for its employees, for work done in Australia, into a superannuation fund. This is the case unless the employee: • holds a certain type of visa; • is not a resident of Australia and the work is done outside Australia; or • is under 18 and working 30 hours a week or less (ss 27, 28). Superannuation 5.6 Contributor: Paul Bingham, Barrister