Superannuation

The superannuation industry has boomed in recent years since the introduction of the compulsory superannuation contribution in Australia and the investment of individual savings into retirement plans.

Complying superannuation funds, or Pooled Superannuation Trusts (PST), are subject to a concessional tax rate of 15% on their taxable income, which includes taxable contributions from members and employers and investment income and gains.  The income tax paid by superannuation funds is referred to as Contributions Tax in the industry.

Superannuation funds are able to invest member funds in a Pooled Superannuation Trust (PST) or insurance policy in a life insurance company.  They are then able to transfer their taxable contributions, and the associated tax liability, to the PST or life company under a s275 election.

Superannuation funds that invest funds directly need sophisticated systems and processes to track and compute capital gains and losses on disposal of investments.  Under IFRS, they require strong controls and reconciliations to cross-check deferred tax balances in relation to unrealised gains on their investment portfolio.

Personal superannuation contributions for which a member will claim a tax deduction are assessable to the superannuation fund.  The member must notify the fund of the tax deduction he or she will be claiming under s82AAT, which are typically received in the six months after the fund’s tax year end, but may be received after the superannuation fund lodges its income tax return.

The ATO requires superannuation funds to include all taxable contributions for which notification is received under s82AAT before lodgment of its income tax return.  Taxable contributions relating to s82AAT notices received after lodgment date can be included in the following year’s tax  return.

Accordingly a superannuation fund needs strong systems, processes and controls in place to track s82AAT notices by tax year and cut-off date for tax return lodgment.

The computation of PAYG for superannuation funds require special processes and controls to handle s275 and s82AAT elections noted above.