Reportable super contributions changes explanation

Dependent tax offsets provide tax relief for personal circumstances.

For example, you may be eligible to claim a dependent spouse offset if all of the following apply:

-       Your adjusted taxable income was $150,000 or less 

-       Your spouse’s adjusted taxable income for the year was less than the relevant threshold amount

-       You met all the following conditions:

o    You maintained your spouse

o    Your spouse was an Australian resident

o    You were an Australian resident

o    Neither you nor your spouse were eligible for Family tax benefit part B or were only eligible for it at a shared care rate.

Other dependent tax offsets have been affected in a similar way these include:

o    The housekeeper tax offset

o    The child housekeeper tax offset

o    The parent/parent-in-law tax offset

o    The invalid relative tax offset.

Example

Ben and Julia are in a married relationship. Julia is on unpaid leave. Ben wants to claim the dependent spouse tax offset for Julia in her 2009–10 income tax return. The dependent spouse tax offset adjusted taxable income threshold for the 2009–10 income year is $9,254.

While Julia has no salary or wage income, her employer has made $10,000 in reportable employer super contributions for her during the 2009–10 income year.

As Julia had no other taxable income or fringe benefit amounts for the income year, her taxable income is $0, but her adjusted taxable income (ATI) is $10,000. This is because reportable employer super contributions are included in the income test.

Therefore, Ben cannot claim the dependent spouse tax offset as Julia’s ATI is more than the dependent spouse income threshold for the 2009–10 income year.

The Medicare levy surcharge is a levy that applies to you and your family if your income is above the surcharge threshold for the period during the income year you do not have private patient hospital cover in.

The thresholds for 2009–10 are:

-        $73,000 if you are a single person with no dependent children

-        $146,000 if you are part of one of the following;

o    A family (including a couple) with or without dependent children

o    A single parent family.

Note: If you are part of a family with children, the threshold increases by $1,500 for each dependent child you have after the first.

From 1 July 2009, to work out if you are liable to pay the Medicare levy surcharge, we use the ’income for surcharge purposes’ test. The test takes into account your: 

-       Modified taxable income

-       Reportable fringe benefits, as reported on the payment summary 

-       Total net investment loss 

-       Reportable super contributions.

You only use the ‘income for surcharge purposes’ test to work out if the Medicare levy surcharge applies. If it applies to you, you will be liable to pay a surcharge amount equal to 1% of your total taxable income and reportable fringe benefits. You will also be liable to pay the 1.5% Medicare levy.

Example

Maria has taxable income of $70,000 and reportable employer super contributions of $30,000. Lee, Maria’s spouse, has taxable income of $60,000 and reportable employer super contributions of $10,000. As income for surcharge purposes includes reportable super contributions, their total family income for surcharge purposes is $170,000. Income for surcharge purposes also includes a total net investment loss. However, neither Maria nor Lee has any of these.

Neither Maria nor Lee has private patient hospital insurance. The couple’s family threshold for the surcharge in 2009–10 is $146,000. If their reportable employer super contributions had not been taken into account, their combined income would have been $130,000 and they would not have had to pay the Medicare levy surcharge. However, with their reportable employer super contributions, their family income exceeds the surcharge threshold and they are both liable to pay the Medicare levy surcharge. This means:

Maria has to pay a surcharge of $700 – that is, 1% of $70,000 and lee has to pay a surcharge of $600 – that is, 1% of $60,000.

Note: Although reportable employer super contributions are included in calculating the Medicare levy surcharge threshold, you only apply the actual surcharge to taxable income and any applicable reportable fringe benefits.

On 1 July 2003, super co-contributions were introduced to help low to middle income earners save for their retirement.

If you are eligible and make personal super contributions to a complying super fund or retirement savings account (RSA), the government will match your personal super contribution with a co-contribution up to certain limits.

Example

Juana’s assessable income is $50,000. She has reportable fringe benefits of $10,000 and her employer makes reportable employer super contributions of $20,000 for her benefit. Juana also makes a personal contribution of $1,000 from her after-tax income to her super fund.

For the 2009–10 income year, Juana calculates her total income to work out if she is eligible for the super co­-contribution as follows.

Juana adds together her: assessable income, reportable fringe benefits, and reportable employer super contributions.

Juana then reduces this amount by any business deductions she can claim.

Because Juana has no deductions for the 2009–10 income year, her total income for super co-contribution purposes for that year is $80,000 that is, $50,000 + $10,000 + $20,000 = $80,000.

For the 2009–10 income year, the co-contributions higher income threshold is $61,920. Therefore, Juana is not entitled to a super co-contribution from the government.

However, if Juana had no reportable employer super contributions, her assessable income would have been $60,000 and she may have been eligible for a co-contribution.

You can claim personal super contributions as an income tax deduction on your tax return if you meet certain eligibility criteria. As a general rule, you are not entitled to claim an income tax deduction for personal super contributions in an income year where 10% or more of your income comes from your activities as an employee.

 Example

Ted is an employee and has entered into a salary sacrifice arrangement with his employer. They have agreed that his employer will contribute his entire salary of $30,000 to a super fund on his behalf in return for Ted receiving no salary. Therefore, Ted’s salary is $0.

Ted’s employer also contributes $2,700 super for him based on his pre-salary sacrifice salary. For the 2009–10 income year, Ted has no salary or wages; however, his employer must still report a $30,000 reportable employer super contribution on his payment summary.

In the 2009–10 income year, Ted also receives $40,000 in assessable income from a trust distribution. Ted also makes a personal contribution of $5,000 to his super fund. Ted plans to claim $5,000 as a deduction for his personal super contribution in his tax return to reduce his taxable income.

Ted must work out whether he meets the 10% test for claiming a deduction for personal super contributions. His total income for the test is the sum of his:

-       Assessable income

-       Reportable fringe benefits

-        Reportable employer super contributions.

For Ted, this is $70,000. That is, the sum of the following:  $40,000 from the trust distribution + $30,000 in reportable employer super contributions.

The reportable employer super contributions of $30,000 are from activities as an employee and are greater than 10% of $70,000. Therefore, Ted cannot claim a tax deduction for any personal contributions he makes.

You may be able to claim a tax offset for contributions you make to a super fund or retirement savings account on behalf of your spouse.

You are entitled to a tax offset of up to $540 each financial year if you meet all of the following conditions:

-       The sum of your spouse’s assessable income, total reportable fringe benefits and reportable employer super contributions amounts was less than $13,800

-       You could not claim a deduction for the contributions:

o    Both you and your spouse were Australian residents when the contributions were made

o    At the time of making the contributions, you and your spouse were not living separately and apart on a permanent basis.

If you had more than one spouse during the income year and you meet the conditions for the tax offset for more than one spouse, the tax offset you can claim is the lesser of either of the following:

o     The sum of the tax offset entitlements for each spouse; and

o    $540.

Example

Lucas and Jane are married and close to retiring. To boost her retirement savings, Jane enters into a salary sacrificing arrangement with her employer and contributes her entire salary to her super.

For the 2008–09 income year, Jane salary sacrifices $15,000 and Lucas contributes $10,000 into a super fund for Jane’s benefit. As Jane’s assessable income for the year is $0 and she had no reportable fringe benefits, Lucas can claim a tax offset for the super contributions he has made for her benefit.

For the 2009–10 income year, Jane salary sacrifices her entire salary of $16,000. Again, Lucas contributes $10,000 into a super fund on her behalf. However, the income tests for this offset have changed. From 2009–10, reportable employer contributions, which include contributions made under a salary sacrificing arrangement, are now added to any assessable income and any reportable fringe benefits. As the total of Jane’s income is more than $13,800, Lucas can no longer claim a tax offset for the super contributions he made on her behalf.

The mature age worker tax offset can reduce the amount of tax you are liable to pay. The maximum tax offset is $500.

The mature age worker tax offset is not the same as the senior Australians tax offset or the pensioner tax offset, and some people may be eligible for more than one of these. You include your reportable employer super contributions when working out if you are eligible for this offset.

To be eligible for the mature age worker tax offset, you must meet all of the following conditions: 

·         You must be an Australian resident for tax purposes

·         You must be aged 55 years or more at the end of the income year 

·         You must have received net income from working, within certain limits.

You use your net income from working to work out the amount of mature age worker tax offset you are entitled to. Your net income from working is the total of:

·         Your assessable income for your personal effort or skills, less any related deductions

·         The income you receive from a business you carry on, less any related deductions.

From 1 July 2009, your net income from working includes your:

·         Salary or wages

·         Allowances, earnings, tips and directors fees

·         business and attributed personal services income

·         Net amount of farm management deposits and withdrawals

·         Total reportable fringe benefits amounts

·         Reportable employer super contributions.

·         Your net income from working does not include your:

o    Super lump sums or employment termination payments

o    Payments on termination of employment.