If you are a little confused with the Super Fund system and it’s specialized terms, don’t worry you are not alone. Super co-contributions, self managed super funds, eligible termination payments, Super Guarantees and dozens more of finance jargon is a challenge for the most financially literate among us, never mind those of us that struggle understanding a balance sheet.

The tempting route is to pass on all the responsibility of choosing and managing your super fund to someone else. This might not be a bad solution, letting professionals help you out is often a smart choice. However it is good to understand the basics of super funds and the different options you have so that you know if you are making a good decision or not.

This is especially important when talking about the difference between Master Trusts and Self Managed Super funds so it is worth out time to get comfortable with the pros, cons and differences between each Super fund management system.

Super Funds.

A super fund is a pension saving scheme set up by the Australian government to help and encourage saving for retirement among the low and middle classes. These super funds receive deposits from employers (super guarantee payments, 9% of each month’s wage), super fund members (personal payments) and the government (super co-contributions) where the government matches every dollar saved by the member with $1.5.

The money deposited in the super fund is then invested in order to create interest to add to the basic pension savings. The main choices come when deciding how to manage these super funds. Investing money in today’s markets is no easy task. An in-depth understanding and specialized skills are required to make money, and even then there is a significant risk.

However the government has created a flexible system full of choice where you can choose from three main options in order to manage your Super Fund.

1)    You can manage it yourself.
2)    You can use an industry super fund.
3)    You can use a master trust.

This article will focus on the difference between self managed super funds and master trusts.

Self managed superannuation funds.

With this system the trustees of the super fund (that would be you and maybe someone else) have sole responsibility for the investment and legal responsibilities linked to the super fund. If you do not follow your legal requirements you could be liable to prosecution or a hefty fine. However you have full control of your Super Fund investments deciding how and when to invest.

Master Trusts.

Master trusts offer an alternative for the super fund member that wants control of his super fund investment but does not want to or does not have the knowhow to take full control and responsibility of their super fund. Master Trusts will take on all the administrative and legal task linked to managing a super fund while still providing a lot of choice to members in how they invest their super.

Another reason people are attracted to Master Trusts is the price. Master Trusts work as wholesale Super Funds providing a discounted price when compared to industry super funds. Some Master Trusts will even share the commissions they receive from investment funds with the member.

Super co-contributions are an Australian initiative to help low to middle class earners save for their retirement. The program is simple the Australian Government will match every dollar a person saves towards his pension saving fund up to a certain amount. The Government actually provides $1.50 for every dollar an individual pays into his super fund with after tax payments. Payments that are claimed as a tax deductable payment do not qualify for super co-

Unfortunately according to the Australian Tax Office that manages the oversees the payment of super co-contributions 200,000 out of a total of 1.3 million super co-contribution payments may not be made due to problems in the government payment systems.
What can you do if you feel or realize you are among those that have not received their super co-contributions?
The Australian government guarantees that interest will be paid on all super co-contributions that are delayed. The interest rate specified by the Reserve Bank of Australia is currently at 3.16%.

What do you need to do?

If you are eligible to receive super co-contributions and you are making your personal payments that qualify you for super co-contributions you do not need to do anything. The Australian government will continue to pay interest and pay super co-contributions automatically to your chosen super fund. Interest will be due until the super co-contribution is paid.

If you are anxious about this delay you can always contact your super fund to satisfy yourself that interest is been paid. You can also ask them to notify you as soon as the co-contribution payment is made.
For those that are suffering some kind of hardship due to this delay there is a telephone hotline they can contact at 1300 139 027 where you will be able to talk about your situation.

When do you qualify for direct payments when your super co-contributions are delayed?

The only circumstance that makes you eligible for direct payment is when you are already retired and no longer have an eligible super account to where the co-contribution can be deposited.

There is no reason to worry, if you qualify for super co-contributions and make the appropriate personal payments your super co-contributions will be eventually made with interest which means that you will not lose any savings due to the delay. Not a bad deal when you are getting a “free” super payment.

Super funds are one of the fastest growing products in the Australian finance market. This has caused a great increase in the number and variety of options in Super funds that are offered.

Master Trusts are a investment portfolio solution which seeks to simplify the work for super funds that attach themselves to the Master Trust. A useful analogy might be found in insurance companies. A customer might buy an insurance policy from a specific insurer; the insurer will also be insured by another insurance. Master Trust work in a similar way as Funds for Super funds.

What do these Master Trust do for you or your Super Fund? Why would you be interested in contracting the services of a Master Trust? What are the points to keep in mind when choosing a Master Trust?

What do Master Trusts do?

They provide a low cost investment portfolio for members. As you know Super Funds are the product the government uses to collect people’s savings for retirement. Complying Super funds are awarded a 15% tax break and are responsible of investing peoples super for it to grow until the super is terminated and the cash is handed out.
Master Trusts invest the money from other funds in order to minimize costs. This is especially good for  people that manage their own Super Fund. Making the right choices when managing a Super Fund is not an easy task when you don’t have the necessary skills which is where Master Trusts come in supplying investment plans and portfolios for Super Funds.

But what is the difference between a Master Trust and a regular Super Fund? Why would I be interested in using a Master Trust?

The main issue when choosing a Super Fund or deciding to manage your own Super Fund is cost and control. You might feel that you could do the same job and save yourself the Super Fund manager’s fee. Master Trusts allow you to save money on the Super Fund managers commission by offering a wholesale price in exchange of a high volume of super funds to manage.
Regular Super Funds also use these Master Trusts as a way of cutting costs and passing the management expense to the Trust.

What should you keep in mind when choosing a Master Trust?

Master Trusts offer different products at different prices. It is important that you decide what services your Super Fund requires and how the Master Trust will provide them. Typical choices include a portfolio for:
-    General saving and investing
-    Superannuation rollovers, personal, spouse and employer contributions
-    Converting your superannuation savings into an allocated pension.

Master Trusts also offer a selection of investment options from various fund managers and specialists without having to deal with each fund manager and at much lower management costs.

Master Trusts are yet another tool to make the most out of your super fund. If your are thinking of managing your own super fund they might a cheaper way of using experts to run your fund or at least a good way of getting a feel of the going rate when choosing another Super Fund.

What are Superannuation Guarantee Payments? Are you eligible for them? How can you make sure they are paid in your behalf? What to do if you think they aren’t being deposited in your super? What about contractors are they entitled to Superannuation Guarantee Payments?

These questions are very important if you are a Super fund member or are planning to. Let’s begin with our first question

What are Superannuation Guarantee Payments?

Superannuation Guarantee Payments are a way to save for your retirement. In many countries they are called pension funds or retirement savings. The principle is not new but the Australian Super Fund puts a new twist by increasing the flexibility and control provided to users. The idea is to force people to save for retirement by getting employers to deposit 9% of the employees wage in a Super fund. The government forcing the employer to make the payment instead of using taxes to fund the pension fund is of course a smoke screen or gimmick. The 9% payment actually becomes part of the employee’s wage that is how the employer sees it when he has to calculate the real cost of having a worker. Wages must be adjusted to take this new expense into account which will eventually mean a readjustment of wages in line with this new expense. In the end it is the employee that pays the cost, there is little difference between setting up a tax to pay for pension funds or forcing people to contribute 9% of their wage towards their pension fund.

However, smoke screen or not it is an effective way to get people to save from the moment they start working.

When are you eligible for Super Guarantee Payments?

If you work for someone you are more than likely eligible as the requirements are very easy to meet.
If you are:

Over 18 and under 70 and made over $450 before tax you are eligible and even if you are under 18 you are also eligible if you worked more than 30 hours on a given month.

What if you think your employer is not paying your Guarantee?

You will know if your employer is paying you Super Guarantee Payments because you will receive an annual member’s statement from your fund. If you do not receive the statement or it is inaccurate then you must talk to your employer and try to settle the problem. Prepare yourself with specific questions for your employer, how much is he paying, to which fund, how often?
If you still feel like you are not being paid your due in Guarantee payments you can file a complaint to the Tax Office.

What about contractors are they eligible for Guarantee Payments?

The answer is maybe. If you are contracted under a contract that is mainly for labor your employer might be liable to pay Guarantee Payments. Talk to your employer and contact the Tax Office for more information on this issue.

If you have been doing (as you should) your homework and researching on your super fund you might very well have come across the term “eligible termination payments” or maybe you are about to receive a termination payment, either way it is in your interest to understand what it is and how it affects your super and your tax.

Put simply, eligible termination payments are lump sums that receive special tax treatment or tax concession. This means you pay less tax than you normally would when you receive your eligible termination payment (ETP).

When can you receive an eligible termination payment?

As a general rule super funds cannot be accessed unless certain, rather strict, conditions are met. If you access your super fund outside these special circumstances you will pay full tax on your payment as if it were a normal part of your income.

However you may receive an Eligible Termination Payment (ETP) if:
-    You are moving or combining super savings into one account, fund or policy.
-    You turn 65 and your super fund starts paying your superannuation benefits.
-    Have an employer sponsored fund that pays out your super savings when you change jobs or your employment is terminated.
-    If you retire early due to a permanent disability.
-    Change to another industry and your previous industry fund’s rules require you are paid your super benefits.

What to do when you receive a eligible termination lump sum?

You have two main options when receiving an ETP, either take the cash or rollover the money into another complying super fund.
How will you know if your lump sum is an eligible termination payments.
It is your superannuation fund that decides if your transaction or benefits are an ETP or not? As a rule of thumb all lump sum payments from superannuation funds are ETP.

How will I know if I am to be paid a lump sum?

In most cases your super fund will contact you and inform you of any payments that are about to be made. If you are running your own super fund you will be responsible for knowing which super fund must pay out benefits or in the case that you use a “master” super fund to manage your personal fund they will inform you.

Once you are informed that you are going to receive an eligible termination payment you have 30 days to decide what to do. If you are under another super fund, the fund might ask you to decide earlier if that is reasonable.
The two main options you have when deciding what to do with you ETP is to either cash in the payment or roll it over to another super fund.

You will not receive an ETP notice if you have already provided enough instructions on what to do or if the ETP you are to receive is from the death of another person. This type of ETP cannot be rolled over and must be paid in cash.

Growing your super fund is probably the most important economic decision you will make. Growing old without money is not fun, now is the time to plan for our retirement savings. Why is that? Saving enough to live the 20 to 30 years we will hopefully survive after retiring is not easy. The best way, certainly the safest way to save for old age is to invest in a medium to low risk stock fund and let compound interest do its job.

Compound interest is simply the concept of earning interest on interest and is responsible for the high returns investment funds reap throughout long periods of time. To illustrate if you invest $100 in a compound interest account at %10 a year and just leave it there you will earn $110 in the first year, $121 the second and so on. It might not seem like a lot but over years and with constant deposits in the fund and by starting early in our life we can all be millionaires by the time we reach retirement age.

The current Superannuation system set in place provides great incentives and handouts to those who are willing to save for the future.
These incentives include contributions by employers which are required to contribute a percentage of your wage towards your superannuation, personal contributions that can be tax deducted and co-contributions which are paid by the government. Super co-contributions will be the main subject of this article, more precisely how to calculate your super fund co-contributions.

First of all, what are super co-contributions?

Super co-contributions are contributions paid into your super fund by the government. These payments are designed to match every dollar you deposit in your fund as a personal contribution where you don’t claim a tax deduction. Remember how your parents might have encouraged you to save for a bicycle or some other thing you wanted and told you they would match any amount you saved. Your parents did this to train you and encourage saving, which is exactly what the government is trying to do.
However, as you might have expected there are limitations on how far the government will go with co-contributions and who qualifies for this benefit.

Eligibility for co-contribution is simple to understand. You must:

a)    Make personal contributions to your super fund by the 30th of June of each year.
b)    You total income (wages, rent, interest and other sources of income) must be less than $60,342, although this will change yearly in line with average wages.
c)    You are under 71
d)    10% or more of your income comes from employment, the running of a business or both.
e)    You lodge a tax return.

If you qualify for co-contribution there is not much you need to do in order to receive it, simply make a contribution to your complying super fund before the 30th of June and file a tax return. The tax office will do the rest.

There is one small snag you must remember you can only claim co-contribution for payments you make to your super fund you don’t claim tax deductions on. Not a bad problem to have really, choosing between getting double what you pay and deducting what you pay from your tax payments.

Super funds are investment products very much like any other investment fund you have used or heard about. The principles are simple; money is deposited in the fund where it is invested in different stocks, businesses or other investment funds. The exact nature of the investment depends on the trustees of the fund that choose what investment plan is followed. The only real difference between super funds and general investment funds is the accessibility of your money. When it is deposited in a super fund you can only access it in very specific circumstances, when you are 60 or over, are dying or your beneficiaries can access it if you are dead. Other funds also tend to have some kind of limitation on when, how often or how much you can take out from your fund but these limitations are rarely as strict as super funds.

Now if you have decided to manage your own super fund you must understand that along with the freedom of choosing in what and when to invest your super fund comes increased responsibility. Managing a super fund is not a simple task but requires specialized knowledge in law and finance.

Although there are real benefits from managing your own super fund, like more control of your fund and savings in commissions and fees, it is still a serious decision you must think carefully about before making up your mind.

This article seeks to provide a simple checklist of things you must remember before you setup your managed super fund.

These are some pointers you must not forget:

1)    You need to inform your members of any relevant information to the super fund.
2)    The money in the super fund must be kept separate from your personal funds.
3)    You must keep your members interests in first place and must not enter into contracts that override their personal right to exercise functions or powers.
4)    You cannot allow members to access their funds early.
5)    You must carry out a yearly audit of your super.

These are just a few of the responsibilities you must comply with if you manage your own super fund. If you are seriously considering managing your own fund you should download all the documentation and guides offered by the tax office at  www.ato.com.au .

Complying with the rules of super funds is a serious matter. Failing to do so could have serious consequences, including paying back any money that is linked to your breach in responsibilities, your super fund being declared non-complying with the loss of tax concessions and ultimately prosecution for breaking the law.

Although self management can be a good move for some it is not something to be carried out without solid backing and a good understanding of the rules and requirements involved.

If you have been doing research on Super funds, super contributions, super employer contributions and co-contributions (if you would like more information on any of these terms do a search on our home page www.cleversuper.com.au ) you might be justified in thinking that the government has not designed super funds with self employed people in mind.
It is true that the government has designed super funds and the whole superannuation system with low to middle class (whatever that actually means) people in mind. However most self-employed fall into this category and only a small percentage of self employed people are wealthy, so what are your super fund options if you are self employed?

The Government does not require self employed people to contribute towards a super fund. However it is just as important to plan for your retirement (perhaps even more important) when you are self employed or employed by someone else.
You could or even should view Super funds as a form of retirement savings while you claim tax deductions on these contributions. Just the fact you can deduct super contributions from your tax is an immediate profit for you. This is because taxes you save today are worth much more than the same amount of taxed paid in 10, 20 or 30 years in the future where inflation will have reduced the buying power of the money you save and can spend today.

The first step you must make if you are self employed and are considering using super as a retirement savings plan is to make sure your chosen fund complies with government requirements, a good tool for this is the Australian Tax Office Super Lookup application. This application will supply information on your chosen fund so you can confirm it is a complying fund.

Your second step is to find out how much help you can get from the government towards your super fund. As from the 1st of July 2007 self employed people who earn an income from running a business either as a sole trader or in a partnership can be eligible for super co-contributions. As you probably already know super co-contributions are the contributions the government makes towards your super fund when they match any personal contribution you make. There are some requirements you must meet in order to qualify for super co-contributions.

You must either have:

1)    Eligible employment
2)    Run your own business
3)    or a combination of both.

Income from a business only includes income you receive as a sole trader or in a partnership not trust distributions.
Another possibility you must not forget when you are self employed is that you might be eligible for employer contributions even if you are considered self employed. For instance if another person or company employs you in a contract that is basically or mostly for labor, the employer or contractor might be required to pay super contribution towards your super fund.

If you are self employed planning for your retirement is a must and super funds might just be the way forward for you. Find out where you stand in the superannuation program and start growing your super as soon as possible.

Super Funds have become one of the biggest and fastest growing finance products in Australia and it is no secret why. The Government has provided an excellent platform on which people can build their pension or retirement fund with excellent benefits and incentives to make saving more attractive.

However there are some sections of Super law that limit the amounts you can contribute while still benefiting from the tax breaks and benefits Super funds and contributions afford.

One of the factors that limit the amount contributed is what proportion of your contributions fall under concessional contributions and non-concessional contributions. Understanding what these terms mean and how they affect your super and the tax you pay is well worth spending a few minutes on as they can help you plan your contributions in a more efficient way.

What are concessional contributions?

Put simply concessional contributions are contributions that are still subject to tax. You could compare it to your gross wage, the wage your employer pays from which you have to pay tax, insurance, super, etc…

It is probably easier to understand concessional contributions as before tax contributions. Examples of concessional or before tax contributions are:

1)    Employer contributions. These are the contributions paid by your employer monthly. By law this is a minimum (they can always pay more) of 9% of the employees wage.

2)    Personal contributions paid by the self employed or other eligible super fund members that are used as a tax deduction.

3)    Termination payment in excess of $1 million.

4)    Contributions to a fund where the liability of paying the tax has been transferred to a life insurance company or superannuation trust.

5)    Contributions to a fund that are not assessable due to a fund’s pre 1st of July 1988 funding credits.

It is important to note that even if you split your contributions with your husband or wife, it is the full amount of your contributions that counts toward your concessional contributions cap. As we learned in our last post the concessional contribution cap for anyone under 50 is $50,000 and for member over 50 it is bumped up to $100,000.

It does look like most contributions are considered concessional and therefore taxable and the truth is that most contributions do fall in this category. However that doesn’t mean they all do. Here is a list of contributions that are not considered concessional and therefore the tax of these contributions has either already been paid or are not taxable.

1)    Transfers from a complying fund where the transfer includes untaxed contributions included in the funds assessable income.

2)    Personal contributions that are not claimed as a tax deduction and on which you already have paid tax.

3)    Fund transfers from a foreign fund, again tax has supposedly already been paid on it.

4)    Contributions to constitutionally protected fund.

Example 2 is worth highlighting. This is another Government incentive to encourage personal contributions to our super fund as we will not have to pay tax on any personal contribution we don’t claim tax deduction on. This is good for the government as a $1 in tax paid now is worth many dollars in tax in the future while it still provides us with a tax free investment for our retirement.

If you have been reading the articles on this blog and other sites on Super Funds you have probably began to realize that it is a sweet deal. You can contribute towards your pension fund, get tax breaks on the money you save for your future, get contributions from your employer and even sacrifice your salary for extra super contributions that benefit both you and your employer. Not only that in many cases the government is willing to match every dollar you contribute towards your super fund.

It doesn’t take a rocket science to realize that the Government is trying its best to make saving for our retirement as attractive as possible. It is no surprise as we see the population of Australia and similar countries aging and people saving less and less. The Government wants you to save and is willing to pay you for the privilege. Pretty nice when someone pays you to do what’s good for you!

This might make you think, mmm, I have some extra cash could I throw it into my super fund and get the great deals the Government is offering. The answer is probably yes, up to a point. The idea is to help people who would otherwise find it very difficult to save and make sure they have enough for when they retire not to provide an easy ride to already wealthy people. Having said that the caps or limits the Government places on super contributions are rather generous and you will probably not have to struggle to keep within the Government cap on super contributions. It is also worth noting that these caps are only on the tax breaks and co-contributions, you can contribute as much as you want, you will just might end up paying more tax than you want to.

So after all that, what is the current concessional contributions cap?
For the 2007/2008 and 2008/2009 financial years the concessional contributions cap (more on what concessional contributions are on our blog) is $50,000 per person. This yearly cap is indexed annually to average weekly (ordinary) time earnings of $5,000.
Anything over this amount will be subject to extra tax.

If you are over 50 the cap increases from $50,000 to $100,000 per year. This allowance is planned to be maintained up to 2012. The logic behind this increase in the contribution cap is that people in their 50’s are probably doing their best to build up their retirement fund as quickly as possible and want their money to be invested as soon as possible.

If for any reason your planned contributions will be over and above your concessional contributions cap you should contact a financial planner that can help you to plan your contributions as tax efficiently as possible.

Salary Sacrifice, that doesn’t sound so good, I would much prefer  a salary boost. Of course most of us understand what salary sacrifice means in the context of tax and super and that it actually does generally mean a salary boost if used wisely.

First things first, let’s define what salary sacrifice means for you and me. Salary sacrifice is an arrangement between an employer and an employee to forego future wages in exchange of certain benefits of similar value. These benefits could include one or any of these examples: extra super contributions, car fringe benefits, allowance for school fees, child care, loan repayments.

However as with all things financial a general good idea can be terrible if you do not know what you are doing. It is therefore always a good idea to consult a financial advisor every time you are considering asking or accepting a salary sacrifice.

What are the requirements?

There are a variety of requirements that must be met before you can make a legitimate salary sacrifice arrangement. For instance you can only make salary sacrifice for wages you are yet to receive, it cannot be retroactive. The salary sacrifice must also fall under some certain categories and formats which include the list of benefits we mentioned above.
You might also have to pay an administrative fee to your employer for the managing of your salary sacrifice arrangement. Remember, the pen pusher behind the desk has to eat and feed his family also.

What are the benfits of salary sacrifice for super?

Super contributions do not fall under fringe benefits for tax purposes when paid into a complying super fund. This provides a list of benefits to your employer. He won’t have to pay fringe benefits tax on the super contributions or include the super contributions as a reportable fringe benefit on your payment. These payments are also deductible for your employer and you can more often than not claim a tax deduction also.
Contributing towards your super fund with a salary sacrifice also reduces the income assessable for tax and the amount you invest in your fund is taxed at a maximum rate of 15%.

However there is a limit in the amount of cash you can contribute towards your super fund before you start having to pay extra tax and it is not longer a cost effective investment. Make sure you check our website or the Taxation Office for more details about paying super fund contributions and your tax.

We all like to have control over what we do which is why Self Managed Super Funds are quite attractive for many of us. We prefer to decide what we invest or how we invest our Super Fund than having some other person or organization do so for a price or commission. We might even feel we can do better than the average super fund and that nobody will put the time and interest in our fund that we will.

All these arguments and points are valid and worth thinking and acting upon. However if you are thinking about managing your own super fund there are two points you need to think about.

1)    Managing your own fund is a privilege and a responsibility. If you manage your own super fund it will be your responsibility (and yours alone) to fulfill the legal requirements associated with your fund. Not complying with your legal super fund requirements can mean red tape, time and ultimately fines. You must therefore have the legal knowledge or advice to meet your legal super fund requirements.
2)    Managing your own super fund means exactly that, deciding what to invest your money in. This might sound good and it can be, but it also means that you are responsible for the investments you make and without the financial knowhow you could make bad choices and lose your hard earned Super contributions.

If you still think managing your own fund is a good idea your next step is the find the knowledge and / or advice you need. You can find this knowledge from many sources, it is always a good idea to get your advice from established and experienced operators that can help you make the right moves to invest your super fund and make it grow. It is therefore a good if not vital move to contact a legal and a financial expert before you make any drastic moves with your super fund.

Without this advice you run the risk of either not meeting your requirements for a super fund, lose money (unfortunately that is always a risk, however this risk is lower if you invest wisely for the long term) or fall out of the definition of a self managed super fund.
It is therefore a good reminder to go through the main requirements of a legal and licensed super fund. The exact rules that govern your self managed super fund will depend on the kind of self managed super fund you have (more posts on that issue soon)but these general guidelines apply to all self managed super funds:

1)    You must be honest in everything you do related to your fund. The taxation office will fall on you like a ton of bricks if you don’t.
2)    You must be diligent and know what you are doing with matters related to your fund.
3)    You need to act in the best interest of the super fund members. That is easy when you are the only member but requires more attention when your fund has other members.
4)    Keep your personal assets and the super fund separate.
5)    Have control over your super fund at all times
6)    Have a clear fund investment strategy
7)    You can’t embark in contracts or agreements that involves depriving members of rightful control of their assets.
8)    Provide your members with required information.
9)    You can’t access or allow others to access funds early.

Understanding and putting into practice these guidelines will allow you to overcome many of the dangers of managing your own super fund.

]]> http://www.cleversuper.com.au/self-managed-super-funds-dangers-and-opportunities/feed/ http://www.cleversuper.com.au/superannuation-guarantee-payments/ http://www.cleversuper.com.au/superannuation-guarantee-payments/#comments Mon, 22 Jun 2009 23:07:21 +0000 dba2003 http://www.cleversuper.com.au/?p=52 Superannuation Guarantee Payments

Superannuation Guarantee Payments are the payments an employer makes towards an employee’s Super fund. This guide will help you understand when you must pay Super Guarantee Payments and how to calculate how much you must pay toward your employee’s Super fund.

Are you an employer for Super Guarantee Payment purposes? This might seem like a dumb question, surely you would know if you are an employer. However this might not be the case as by law you must pay Superannuation Guarantee Payments even in settings which are not traditionally considered a employer / employee setting.

To set the record straight you are an employer if you employ someone (verbal and written contracts are valid) full-time, part-time or on a casual basis. To put it simply you must pay super guarantee payments whenever you employ anyone for any amount of time. No surprises there. However you are also considered an employer if you pay someone for a job under a contract which consists mainly for labor. For example if you paid a graphic designer to design a website for you, you must pay the contract fee and the Super Guarantee payments.

Do all employees qualify for Super Guarantee payments? Nearly, the requirements are rather broad. All employees that are over 18 and under 69 and are paid over $450 or more in a given month qualify. The $450 are calculated before tax.

How much Super Guarantee payment must you pay?
This is rather easy, to work out your employee’s Super Guarantee entitlement you must multiply their wage under ordinary time earnings (what was established in his contract) and multiply by 9%.

When must you pay the Super Guarantee contributions?
You must pay the 9% of the employee’s ordinary time wage by the quarterly payment cut-off set out by the Tax Office. According to this program any payments made in:
1)    The first quarter, (1st July to 30th September must be paid by the 28th October.]
2)    The second quarter (1st October to the 31st December) by the 28th of January
3)    The third quarter (1st January to the 31st of March) by the 28th of April.
4)    The fourth quarter (1st April to the 30th of June) by the 28th of July.
A charge must be paid on Super Guarantee payments that are not made on time

What happens when the cutoff date falls on a weekend or public holiday?
You can still make the payment the next working day without having being late in making your Super Guarantee payment.

To illustrate these requirements consider this example:
You employ a worker named John Smith who has worked faithfully for your company for three years. You feel he deserves a raise, which you provide in the month of may, the fourth quarter of the year. For the fourth quarter John’s earnings are $10,000. You must pay a minimum (you can always pay more if you want, John would appreciate it) of $900 towards John’s Super fund by the 28th of July. If you are late in paying the Super Guarantee you will have to pay a super guarantee charge as penalty.

If you are asking this question the chances are you know what a Super fund is. The chances are you are Australian also because for the rest of the World Super funds sound like a really boring superhero.

Self managed super funds or SMSF’s are just a Super fund where the trustee has the sole responsibility of managing the fund. The trustee being you. This opens a whole world of investment opportunities and pitfalls. Being the member and trustee of the fund you answer for the management and legal responsibilities tied to a Super fund.

As all Super funds your Super fund will receive a tax concession. Any contribution deposited in the Super will be taxed at 15%. However being allowed to manage a Super does not mean you are qualified to do so. Managing a Super fund requires a good understanding of Super law and tax regulations.

So how can you manage your own Super fund? If you are a professional financial advisor you won’t be reading this How to guide so we will start from the very basics.

1.)    The first thing you should do is contact a professional that can give you advice in managing your Super fund. A professional will be able to give you advice on how to setup the fund, what regulations you must follow and write out the documentation you need.
2.)    Once you have setup the legal and paperwork side of your fund you will need to start investing in it. How can you decide what to invest in and how much to invest? You need to start by talking with a licensed financial planner. To find out more on financial planners in Australia, please visit www.asic.gov.au for more information and details and to check your financial planner has an up-to-date license.
3.)    You will need to follow your administrative obligations which include speaking to a specialist administrator for help with running your fund.
4.)    You must also carry out a yearly audit. If you need help in how to do it please contact any of the professional associations that control the Super fund sector.

The Australian Tax office supplies the necessary information to find out what regulations and requirements are needed. The Australian Tax Office provides with details about these regulations and will help you to follow them.
It cannot be emphasized enough the risk that is found in investing your own fund. Not everybody is best suited for making financial decisions of this kind and some do not fare very well. Think hard before making this move and if you do look for good advice before starting.

In our previous blog we discussed the amendment in Tax Law that benefits people who are terminally ill. These tax breaks are very welcome and help not only those who are suffering from a terminal illness or injury but for those of us who are investing or planning to invest in a Super fund as they provide peace of mind providing the knowledge that you will be able to access your super fund if you have serious health problems.

This blog will focus on how to go about claiming your Super fund when in a terminal medical condition. First of all lets revise the requirements to access your Super fund. For you to be considered to be with a terminal medical condition there are three main requirements.

1)    Two doctors must certify that you are terminally ill or injured and that you are likely to die within 12 months.
2)    One of these doctors must be a specialist in the area of expertise that encompasses the illness or injury.
3)    When you request access to your super fund the certification period cannot have ended

Even if the third requirement is not met you might still be able to access your Super fund, although it might not be Tax Free. In fact any benefits from contribution after the medical certification period is over will not be covered by these conditions of release. Your super fund managers should talk to you about what new certification you can provide.
How are Super funds accessed by people with a terminal medical condition taxed?

As explained in our previous blog these people will not have to pay tax, they will be non assessable non exempt income, in other words TAX FREE! Of course for tax free exemption the medical condition must exist when the payment is made or at the very least within 90 days of receiving the payment.

It is also required that the tax free payments are paid from a registered and complying super fund or attached pension fund. This category includes, super funds, public sector super programs, approved deposit funds and retirement saving accounts.

Can you be entitled to any other credit balances?

When you claim for early release for a medical condition you should also check for any credit balances and make sure these amounts are transferred. You could receive these credit amounts from the Government’s super co-contributions, the contributions paid by your employer and other unclaimed super money.

What should you do once you receive the early release medical certificate?

You should make a super lump sum payment as soon as you receive the medical certification. As mentioned these payments are tax free and you don’t need to withdraw any of the payments for tax. You do not need to provide a payments summary to your Super fund member as in other circumstances or report to the Tax Office as these payments are non assessable.
These payments are payable to you even if you do not have a tax file number or have not provided it to the Super fund manager. Make sure your Super fund is not withholding any of your valuable super payment