Unit 10 Superannuation - Learning Outcomes Explain the...

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1/17/2012 1 Unit 10 Superannuation Chap 16 Learning Outcomes Explain the structure and recent changes in the Australian superannuation system Explain the operation of the superannuation guarantee charge act. Compare and contrast the regulation and use of SMSF and public superannuation funds Explain the rules and taxation of contribution to and payout from superannuation funds. 2 History of Superannuation in Australia • The three-pillar model to retirement funding – Age pension – Occupational based contribution – Personal contribution • Changes to contribution – Initially 3% of gross income – Currently at 9% of gross income (increasing to 12%) – Co-contribution for low income earners – Employment requirement lifted for anyone <65 yrs 3 • Changes to taxation on payout – Used to be complicated – Currently lump sum payout is tax free for 60+ • Other changes – Easier to transfer between funds – Reasonable Benefit Limits abolished – Cooper Review: MySuper and Superstream – Ripoll Inquiry: Ban commission-based fees and charges from 1/7/2012 – Reduction of contribution thresholds The Basic: Superannuation Guarantee • Imposed on all employers • The charge can only be reduced by an employer contributing a percentage of a person’s ordinary time earnings – Overtime and allowances excluded • The contribution which is required to be paid on a person’s earnings in each quarter must be at least equal to 9 per cent of the employee’s ordinary time earnings 5 Three Stages of Superannuation Contributions • Usually involves cash being paid into the superannuation fund for its members • Contributions may be made: – by an employer for employees – by employees – by people under age 65 – by the government as a co-contribution 6
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1/17/2012 2 Accumulation • The balance is invested and taxed at the concessional rate of 15% on income and 10% on long term capital gain. Benefits • Must meet at least one condition of release under the Superannuation Industry (supervision) Act 1993 • Payout in lump sum and/or pension 7 Types of Benefits • Defined Benefit (not commonly used now) – Payout based on a formula typically related to income in the final year of employment – Investment risk absorbed by the employer – In the U.S., these are called pension funds • Accumulation Fund (almost all new plans) – Investment risk rest on the individuals – In the U.S. these arrangement is called the 401k plans. 8 Superannuation Legislation • The S uperannuation I ndustry ( S upervision) Act 1993 (Cth) aimed to establish greater control over the superannuation industry and to ensure that there was greater security over superannuation savings through: – requiring superannuation funds to have a ‘prudential framework’ – restricting funds from investing in particular areas – ensuring members are notified about their benefits – requiring trustees to ensure the security of funds 9 Regulators • APRA
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This note was uploaded on 01/25/2012 for the course FINS 5510 taught by Professor Kingsleyfong during the Three '11 term at University of New South Wales.

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Unit 10 Superannuation - Learning Outcomes Explain the...

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