Taxation of Superannuation

This document discusses the taxation of superannuation funds, specifically focusing on the difference between complying and non-complying funds. It explains how these funds are treated for taxation purposes in 2019 and provides a step-by-step guide on preparing tax returns and superannuation fund balance calculations for individuals named Brett and Karen. The document also includes references to relevant legislation and case law.

Running head: TAXATION OF SUPERANNUATION
Taxation of Superannuation
Name of the Student:
Name of the University:
Author’s Note:
Course ID:

1TAXATION OF SUPERANNUATION
Table of Contents
Part A:..............................................................................................................................................2
Explaining what is complying superannuation fund, while indicating the difference between the
pension and accumulation mode:.....................................................................................................2
Explaining the legislation, ruling and case law how each of those items will be treated for
taxation purposes in 2019:250.........................................................................................................3
Preparing a tax return and superannuation fund balance calculations for both Brett and Karen:...3
Part B:..............................................................................................................................................4
Stating how inflow and cashflow items be treated for tax purposes if the superannuation fund
with non-complying superannuation fund in respect of the 2018-2019 income year:....................4
Including the explanation with reference to specific and legislation from ITAA1997:..................6
References:......................................................................................................................................7

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Part A:
Explaining what is complying superannuation fund, while indicating the difference
between the pension and accumulation mode:
There is relevant difference between the superannuation fund pension and accumulation
mode, which could have direct impact on the current tax liability of the individual. The
superannuation fund is relevantly associated with pensions and accumulation mode, which can
help in detecting the total taxable income of the individuals. Moreover, under the taxation
conditions of sections and legislation from ITAA1997 the overall difference in both pension and
accumulation mode. Under the sections and legislation from ITAA1997 the superannuation fund
associated with pension will have no relevant changes on the investments1. In addition, the
individuals could not control the relevant investment of the superannuation pension fund.
Furthermore, employees in the pension fund are not allowed to select relevant investment
decisions, which relevantly reduces the level of investment risk that is been faced by the
employee. As per the sections and legislation from ITAA1997, pension fun is manged by
investment professional, who is responsible to generate higher rate of return in the long run2.
On the other hand, the accumulation mode superannuation fund could directly have direct
impact on the performance of the organisation, where the relevant changes would alter over the
1 Hanrahan, P. A. M. E. L. A. "Legal framework governing aspects of the Australian
superannuation system." Background Paper 25 (2018).
2 Chardon, Toni, Brett Freudenberg, and Mark Brimble. "Tax literacy in Australia: not knowing
your deduction from your offset." Austl. Tax F. 31 (2016): 321.

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period of time. The accumulation mode of superannuation fund under sections and legislation
from ITAA1997 relevantly indicates about the first stage of everyone’s superannuation life. In
addition, the contribution that is made, where relevant locked away phase is started, where the
fund could be accessed until the retirement. In addition, the first stage of the of the accumulation
stage is considered to be retirement phase and second phase is pension phase3.
Explaining the legislation, ruling and case law how each of those items will be treated for
taxation purposes in 2019:250
The relevant legislation, ruling and case law how each of those items will be treated for
taxation purposes in 2019 are depicted as follows.
 ITAA1997: Directly states about the Superannuation Industry (Supervision) Act 1993 ss 10
(definitions of ‘superannuation fund’ and ‘regulated superannuation fund’), 19, 42, 62(1)
 Superannuation Industry (Supervision) Act 1993: The SIS Act 1993 has mainly indicated that
relevant funds need to be conducted by the individual. There are many different type of
classifying the superannuation fund, which are depicted as follows
o Funds which provide pension benefits • funds which provide lump sum benefits
o Funds which are open to members of the public
o Private funds which are established by an employer for the benefit of its employees
o Government funds (so-called public sector funds)4
o Funds established for people who work in a particular industry (industry funds).
3 Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy in
Australia." St Mark's Review235 (2016): 94.
4 Ingles, David, and Miranda Stewart. "Reforming Australia's Superannuation Tax System and
the Age Pension to Improve Work and Savings Incentives." Asia & the Pacific Policy Studies 4.3
(2017): 417-436.

4TAXATION OF SUPERANNUATION
Preparing a tax return and superannuation fund balance calculations for both Brett and
Karen:
Particulars Brett Karen
Income
Superannuation guarantee contributions $ 20,000.00
Personal superannuation contributions $ 10,000.00
tax deduction $ 4,000.00 $ 4,000.00
dividend income $ 5,000.00 $ 5,000.00
franking credits $ 1,500.00 $ 1,500.00
sale of debentures Cooper Superannuation Fund $ 4,000.00 2000
net capital gain on the sale of a town house $ 25,000.00 $ 25,000.00
net capital gain on redemption of units $ 2,500.00 $ 2,500.00
Brett’s family trust $ 2,000.00
pension paid by the fund $ 22,500.00 $ 22,500.00
payment from a UK based pension fund in respect of Brett $ 20,000.00
Cooper Superannuation Fund for Karen $ 5,000.00
Total Income $ 106,500.00 $ 77,500.00
Expenses
Cooper Superannuation Fund for Karen $ 2,000.00
audit and accounting fees $ 2,500.00 $ 2,500.00
Bain and Co solicitors to have the fund’s deed $ 750.00 $ 750.00
Pete, a financial planner, who provided on-going advice $ 1,000.00 $ 1,000.00
$ 4,250.00 $ 6,250.00
Total taxable income $ 102,250.00 $ 71,250.00
Tax (complying superannuation fund ) $15,037.50 $10,687.50
Particulars Brett Karen
Superannuation guarantee contributions $ 20,000.00
Personal superannuation contributions $ 10,000.00
sale of debentures Cooper Superannuation Fund
pension paid by the fund 22500 22500
payment from a UK based pension fund in respect of Brett 20000
Cooper Superannuation Fund for Karen 5000
Income $ 62,500.00 $ 37,500.00
Outflow
Cooper Superannuation Fund for Karen $ - $ 2,000.00
Bain and Co solicitors to have the fund’s deed $ 750.00 $ 750.00
$ 750.00 $ 2,750.00

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Fund value $ 61,750.00 $ 34,750.00
Therefore, the Tax rate on the complying superannuation fund is mainly at the levels of
15%, which is taxed, as per the ATO
Part B:
Stating how inflow and cashflow items be treated for tax purposes if the superannuation
fund with non-complying superannuation fund in respect of the 2018-2019 income year:
Particulars Brett Karen
Income
Superannuation guarantee contributions $ 20,000.00
Personal superannuation contributions $ 10,000.00
tax deduction $ 4,000.00 $ 4,000.00
dividend income $ 5,000.00 $ 5,000.00
franking credits $ 1,500.00 $ 1,500.00
sale of debentures Cooper Superannuation Fund $ 2,000.00 $ 2,000.00
net capital gain on the sale of a town house $ 25,000.00 $ 25,000.00
net capital gain on redemption of units $ 2,500.00 $ 2,500.00
Brett’s family trust $ 2,000.00
pension paid by the fund $ 22,500.00 $ 22,500.00
payment from a UK based pension fund in respect of Brett $ 20,000.00
Cooper Superannuation Fund for Karen $ 5,000.00
Total Income $ 104,500.00 $ 77,500.00
Expenses
Cooper Superannuation Fund for Karen $ 2,000.00
audit and accounting fees $ 2,500.00 $ 2,500.00
Bain and Co solicitors to have the fund’s deed $ 750.00 $ 750.00
Pete, a financial planner, who provided on-going advice $ 1,000.00 $ 1,000.00
$ 4,250.00 $ 6,250.00
Total taxable income $ 100,250.00 $ 71,250.00
Tax (non-complying superannuation fund ) $ 45,112.50 $ 32,062.50

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The above table provides information about the overall tax amount when the fund is non-
complying superannuation fund. The Tax rate for non-complying superannuation fund is mainly
at the levels of 45%, which directly indicates that total taxable income for Brett is at the levels of
$45,112.50 and Karen is at the levels of 32,062.50.
Including the explanation with reference to specific and legislation from ITAA1997:
Under the specific and legislation from ITAA199, the tax offset and credit offset
indicates that the. overall tax rate of superannuation with compliance is at the levels of 15%. In
addition, the similar conditions have indicated that the overall tax rate of the firm mainly
increases to the levels of 45% greater than 30% tax rate of n company5.
References and Bibliography:
Chardon, Toni, Brett Freudenberg, and Mark Brimble. "Tax literacy in Australia: not knowing
your deduction from your offset." Austl. Tax F. 31 (2016): 321.
5 Long, Brendan. "A taxing issue: Reflections of Christian economists on tax reform in
Australia." St Mark's Review 235 (2016): v.

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Chardon, Toni, Mark Brimble, and Brett Freudenberg. "Tax and superannuation literacy:
Australian and New Zealand perspectives." (2016).
Edmonds, Mark, Christian Holle, and Wendy Hartanti. "Alternative assets insights: Super funds-
tax impediments to going global." Taxation in Australia 49.7 (2015): 413.
Evans, John, and Abdul Razeed. "An Analysis of the Australian Superannuation System's Taxes
and Transfers." Economic Papers: A journal of applied economics and policy37.3 (2018): 299-
312.
Hanrahan, P. A. M. E. L. A. "Legal framework governing aspects of the Australian
superannuation system." Background Paper 25 (2018).
Hellwig, Timothy, and Ian McAllister. "The impact of economic assets on party choice in
Australia." Journal of Elections, Public Opinion and Parties 28.4 (2018): 516-534.
Ingles, David, and Miranda Stewart. "Reforming Australia's Superannuation Tax System and the
Age Pension to Improve Work and Savings Incentives." Asia & the Pacific Policy Studies 4.3
(2017): 417-436.
Ingram, Paul. "Is your unit trust a." Bulletin (Law Society of South Australia) 40.5 (2018): 32.
Joseph, Sally-Ann. "An Examination of the Congruence of the Mining Site Rehabilitation Tax
Deductions & Queensland's Chain of Responsibility Legislation." AJEL (2017): 29.
Long, Brendan, Jon Campbell, and Carolyn Kelshaw. "The justice lens on taxation policy in
Australia." St Mark's Review235 (2016): 94.

8TAXATION OF SUPERANNUATION
Long, Brendan. "A taxing issue: Reflections of Christian economists on tax reform in
Australia." St Mark's Review 235 (2016): v.
Sy, Wilson N. "Financial Performance Trends of Australian Superannuation: System and
Sectors." (2018).