Taxation of Superannuation

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

TAXATION OF SUPERANUATION
Table of Contents
Answer to question 1:.................................................................................................................3
Part A:....................................................................................................................................3
Sub part (a):........................................................................................................................3
Sub part (b):........................................................................................................................4
Sub part (c):........................................................................................................................5
Part B:.....................................................................................................................................5
Sub part (a):........................................................................................................................5
Sub part (b):........................................................................................................................6
Sub part (c):........................................................................................................................7
Answer to question 2:.................................................................................................................8
Part A:....................................................................................................................................8
Part B:...................................................................................................................................12

TAXATION OF SUPERANUATION
Answer to question 1:
Part A:
In the question number 1, as it is given, Lisa is 57 years old and she operates a SMSF.
She is having some accumulated balance in her superannuation fund. The total balance in her
superannuation fund is $700,000 out of which $200,000 is tax free component and $500,000
is taxable component. Late r on in December 2017, $500,000 Capital gain Tax exempted
amount, which is applied under the subdivision 152D ITAA97. She also received an amount
from her personal superannuation contribution during 2018 for a total amount of $20,000
She received a total of $44,000 as an income from the total accumulated balance of
superannuation.
Sub part (a):
In the given context, the contribution of $500,000 would be a part of tax free
superannuation as it is received from retirement benefit and applied under the 152D ITAA97.
It has also been a capital gain tax free item hence; it would be accumulated with the tax free
component of her superannuation fund1 as per the provision of the ITAA 1997.
On the other hand, $20,000 will be added with the taxable part of her superannuation
fund. It comes from her personal superannuation contribution, which is taxable. As per the
legislation of ITAA 1997, any amount, which is contributed to the superannuation fund
without paying tax on it, will be included with the taxable part of the superannuation. Any
amount, which is contributed to the superannuation fund after tax adjustment or after tax
amount is taken, then it will be considered as the tax-free part of the superannuation2.
1 Watson, John, James Delaney, Michael Dempsey, and Jayasinghe Wickramanayake. "Australian
superannuation (pension) fund product ratings and performance: A guide for fund managers." Australian
Journal of Management 41, no. 2 (2016): 189-211.
2 Hargita, C. Starla. "Disrupting the hegemonic temporality of superannuation." Australian Feminist Law
Journal 42, no. 2 (2016): 223-240.

TAXATION OF SUPERANUATION
Sub part (b):
Lisa commences her pension fund on 1 July 2018 taking 60% of her superannuation
fund. The fund on that date her previous balance of $700,000 plus the contribution of
$500,000 and $20,000. As per the division 295 of ITAA 1997 in respect of superannuation,
the income from assets supporting the transition to the retirement pension is taxable, and the
basis for computation of the tax on such income must be assessed carefully in accordance
with the respective legislation of the ITAA1997. The balance of her total taxable and
exempted superannuation fund on the date of commencement of pension account can be
computed as below.
Computation of Balance Taxable and Tax free fund as on 1 July 2018
Particulars Tax Free Taxable
Component Total
Balance as on 30 June 2017 $ 2,00,000 $ 5,00,000 $ 7,00,000
Add: Contribution
December 2017 $ 5,00,000 $ 5,00,000
March 2018 $ 20,000 $ 20,000
Interest Credited During the year $ 20,733 $ 23,267 $ 44,000
Total balance as on June 30 2018 $ 7,20,733 $ 5,43,267 $ 12,64,000
Computation of Taxable and tax free interest
Tax Free
Fund Months
(Fund
multiplied
by months)
Taxable
Fund Months
(Fund
multiplied
by months)
Total
200000 12 2400000 500000 12 6000000 8400000
500000 6 3000000 20000 3 60000 3060000
5400000 6060000 11460000
Total Interest $ 44,000
Tax Free $ 20,733
Taxable $ 23,267