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E L E C T R I C A L CO N N E C T I O N
S P R I N G 2 0 15
age, and the superannuation benefit
is paid from a taxed source in the
fund, then there will be no tax on the
amount below the sum of $185,000
for the 2014 to 2015 income year but
it will be taxed at a maximum rate of
15% on an amount over that threshold
where the amount is paid as a lump
sum. Where the amount is paid as an
income stream, then it will be taxed at
marginal rates eligible for a 15% tax
offset. The tax offset can eliminate the
tax that would otherwise be payable.
If the recipient is under the
preservation age, then a lump sum
from a taxed source will be taxed at a
maximum rate of 20% and the income
stream from a taxed source will be
taxed at marginal rates with no tax
offset applying.
Where the superannuation benefits
are paid from an untaxed source within
the superannuation fund to a recipient
of 60 years and over, then the lump
sum is taxed at a maximum rate of 15%
on an amount up to the sum of $1.355
million and taxed at 45% on an amount
over that threshold sum. Where the
benefit is paid as an income stream
from an untaxed source to a recipient
of 60 years and over, then it will be
taxed at marginal rates but eligible for
a 10% tax offset.
Where the superannuation benefit
is paid from an untaxed source
to a recipient who is between the
preservation age and 59 years of age,
then if paid as a lump sum, it will be
taxed at a maximum rate of 15% on an
amount up to $1.355 million, taxed at
a maximum rate of 30% on an amount
above that threshold amount up to the
low rate cap amount of $185,000 and
taxed at 45% on an amount over the
untaxed plan cap amount of $185,000.
These figures apply for the 2014-2015
income year. If the superannuation
benefit paid from an untaxed source to
a recipient between the preservation
age and 59 years of age, then the
income stream will be taxed at
marginal rates with no tax offset.
Where the superannuation benefit
paid from an untaxed source is paid to
a recipient under the preservation age,
then if it is paid as a lump sum, it will
be taxed at a maximum rate of 30% on
an amount up to the untaxed plan cap
of $1.355 million for the 2014-2015 year
and taxed at 45% on an amount over the
untaxed plan cap of $185,000 for the
2014-2015 year. If the superannuation
benefit from an untaxed source is paid to
a recipient under the preservation age, by
way of an income stream, then it will be
taxed at marginal rates with no tax offset.
EXAMPLE
By way of simple example, assume
that Bob and Barbara have their
own self-managed superannuation
fund. Bob is aged 64 years of age
when he retires and takes a $950,000
superannuation lump sum benefit
from the self-managed superannuation
fund. Assume that, the lump sum
benefit is paid from an element that is
taxed in the fund. All of the $950,000
is non-assessable, non-exempt
income. Barbara, who is aged 59,
receives an income stream benefit
of $50,000 from the self-managed
superannuation fund which is made
up of a $10,000 tax free component
and a $40,000 taxable component.
On the basis that Barbara has no
other income, then the $10,000 tax
free component is non-assessable,
non-exempt income while the $40,000
taxable component will be included
in Barbara’s assessable income and
taxed at ordinary rates. Assume that
for the relevant year, the tax liability
on that sum is $5,000, then because
Barbara is entitled to a non-refundable
tax offset of 15% of the $40,000 taxable
component, that is, $6,000, Barbara’s
tax liability is reduced by the tax offset
to nil.
INSURANCE THROUGH A SELF-
MANAGED SUPERANNUATION FUND
Apart from the somewhat
complicated taxation benefits that
apply to members, insurance through
a self-managed superannuation fund
does offer some advantages in that
the payment of insurance premiums
by a self-managed superannuation
for death and disability cover for
its members are tax deductible
expenses. Those premiums would not
be deductible if paid by an individual
taxpayer. In that way, a self-managed
superannuation fund can be a tax
efficient means of providing insurance.
However, the fund will be depleted
if the fund is used to pay insurance
premiums. There will be an advantage
where insurance cover or the insured
sum is greater than the amount of
the superannuation fund held on the
premature death or disability of the
member especially where the amount
that has been accumulated by the
member is relatively modest.
CONCLUSION
While the area of superannuation
is heavily regulated and the taxation
rules that apply to superannuation
funds are complex, the tax
concessions that are provided mean
that a complying self-managed
superannuation fund is an effective
tax shelter that enables the fund
invested to compound and increase
in value at a much faster rate than
other investment entities. Then,
when the superannuation benefits
are paid from a complying self-
managed superannuation fund to a
suitably qualified recipient further
tax concessions are conferred so
that in many cases the receipt may
be tax free.
Gadens
www.gadens.comWhat is all the fuss about, and
if it so good, is a self-managed
superannuation fund something
that you should be using?