OzEMedicine - Wiki for Australian Emergency Medicine Doctors

see also:

• salary packaging for public hospital employees
• investment strategies for busy ED doctors aged under 50 years
• investment strategies for busy 50 year old doctors
• ATO superannuation limits, caps and tax rates

• the following applies to superannuation for salaried employees in Australia but you should verify the details and discuss them with your financial planner or accountant before making any decisions as each person's circumstances and requirements differ, while the ATO tends to change the laws relating to superannuation more frequently than one would like.
• this website takes NO responsibility for any decisions you make, it is merely to provide you with a broad initial understanding to get you started.

• eligible contributions are taxed at 15% instead of your marginal tax rate, thus allowing a much higher base for your investments to start
• capital gains tax is at 10% instead of half your marginal tax rate (ie. CGT rate is 22.5% for most doctors outside of super)
• benefits can be paid tax free after age 60 years instead of potentially attracting your marginal tax rate for investment income streams.

• you can't usually access your money until a condition of release is met (see below)
• you can't have much say in how it is invested unless you establish an expensive and onerous SMSF (see below)
• the government has a nasty habit of changing the rules
• you can't use any SMSF investments for personal or family use - see arms length rulings below
• you can't offset any interest on borrowings or any other SMSF costs against your personal income
• ridiculously low capping of eligible pre-tax voluntary concessional contributions if aged under 50 years limits its utility

• all concessional contributions, including mandated contributions will be taxed within the super fund at 15% as they are contributed (but as of July 1 2012, only for those with incomes under $300,000, and as of 2016, those under $250,000 income, those over this are taxed at 30%)
• by law your employer MUST contribute into your designated super fund - these mandated superannuation guarantee contributions are currently set at 9% of your gross salary.
• you may also opt to make pre-tax voluntary concessional contributions into your super fund by way of salary packaging
  • unfortunately, the changes as of July 2009 limit your pretax voluntary contributions severely if you are aged under 50 years, it is now capped at a ridiculously low $25000 per year INCLUSIVE of employer mandatory contributions!
  • the cap is not much better for those over 50 years - $35,000 per annum BUT ONLY if your superannuation balance is less than $500,000
  • furthermore, as of July 1, 2012, those earning over $300,000 will have the tax on these contributions increased to 30% (ie. a tax concession of 15% instead of 30%), and in the 2016 budget, this was lowered to include those earning over $250,000pa
  • if you exceed these limits, the excess contributions will be taxed at the top marginal income tax rate (ie. ~46%) at the time of packaging.
  • see ATO super contribution limits
• concessional spouse contributions
• non-concessional after-tax contributions
  • you would really only want to do this if you had to maintain cash flow or establish a deposit in a SMSF to enable it to borrow for a loan
  • was capped at $150,000 per year - but as of 2016 budget, it seems this has been limited to lifetime contribution cap of $500,000

• these funds generally have the lowest fees and are the default fund your employer will contribute into
• in the hospital system, this is Health Super

• you can elect to have your super contributions paid into any other eligible superannuation fund such as Asgard, etc.

• these are more sophisticated trust funds with relatively high establishment costs, moderately onerous auditing and management requirements, ongoing maintenance costs for auditing, but which can give you much more control over your superannuation investments albeit within very strict ATO guidelines - see ATO's SMSF guidelines (pdf)
• in general, these would only be considered once there are sufficient funds to make them cost effective - eg. > $200,000.
• for example, typical fees might be:
  • ~$2000 for accountant's statement of advice including review of superannuation and insurance, assessment of fund's ability to repay interest on any loans, etc
  • ~$3000 for creation of a SMSF trustee company, including trust deeds, TFN and ABN.
  • optionally ~$3000 for creation of a bare trust company if borrowings will be needed - the bare trust holds the property being purchased until the loan is repaid.
  • optionally ~$2000-$3000 for establishment of a bank loan - no you can't use or link to your existing personal loan packages
  • annual audit fee of ~$500
  • annual compliance cost fees of ~0.5-0.6% of value of the fund
    • all SMSFs need to lodge an SMSF annual tax return statement with the ATO each year AFTER the audit is completed, in order to:
      • report income tax
      • report super regulatory information
      • report member contributions
      • pay the supervisory levy (currently $150 each year)
• key points of investments within a SMSF include:
  • any costs or interest payments related to property ownership or borrowings within the SMSF must be covered WITHIN the fund by rental or other income and super contributions.
    • ie. you cannot tax deduct loan interest against your personal income
  • fund and investments MUST be at arms length
    • fund must have a separate bank account from your personal bank account - you can't mix fund money with other money
    • fund assets must be in the name of the trustee company of the fund, or in the names of all the individual trustees as trustees of the fund
    • strict requirements for purchasing shares or property - must be at market value
    • trustees or family members of trustees cannot be tenants of any SMSF property or use any fund assets
    • if the fund buys collectibles such as art, wine or jewellery then they cannot be used privately - ie. cannot be worn, drank, etc.
  • investments must be consistent with the core purpose of the fund:
    • core purposes generally are provision of benefits for each member of the fund, on or after the:
      • member’s retirement from gainful employment
      • members reaching the prescribed age
      • member’s death, if the death occurred before they retired from gainful employment or before they attained a prescribed age, where the benefits are provided to their dependants or legal personal representative.
    • common breaches include:
      • investments that offer a pre-retirement benefit to a member or associate
      • providing financial help or a pre-retirement benefit to someone at a financial detriment to your fund.
  • investments must be diversified:
    • it is unlikely that a SMSF with 100% of its assets invested in a property would meet this requirement

• conditions of release are the events your member needs to satisfy to withdraw benefits from their super fund.
• the conditions of release are also subject to the rules of your SMSF (as set out in the trust deed). It is possible that a benefit may be payable under the super laws, but can’t be paid under the rules of your SMSF.
• preserved benefits and restricted non-preserved benefits may be paid out for the following reasons:
  • retirement:
    • actual retirement depends on a person’s age and, for those less than 60 years of age, their future employment intentions. A retired member can’t access their preserved benefits before they reach their preservation age (see below).
    • if aged < 60yrs, intention to work less than 10 hours per week
    • if aged > 60yrs, employment ceased after age 60yrs or intention to no longer work full time or “part time”
    • note that if one commences new employment after “retirement”, super contributions made during this period will not be accessible until a further condition of release is met.
  • attaining age 65 years or more:
    • there are no cashing restrictions once age 65yrs is met
  • terminating employment
    • if the employer-sponsored preserved benefits are less than $200
    • if the employer-sponsored preserved benefits are greater than $200 than it may be possible to paid as a non-commutable lifetime pension or annuity.
  • permanent incapacity
    • if the member is unlikely, because of ill health, to engage in gainful employment that they are reasonably qualified for by education, training or experience.
  • temporary incapacity
    • in general, temporary incapacity benefits may be paid only from the insured benefits or voluntary employer funded benefits.
  • severe financial hardship
    • different conditions for release and cashing restrictions apply depending on the age of the member.
  • compassionate grounds
    • requires approval in writing from APRA
  • temporary residents departing Australia
    • People who have entered Australia on an eligible temporary resident’s visa and who permanently depart Australia can be paid any super they have accumulated subject to a special with-holding tax payment.
  • attainment of preservation age
    • can elect to access their preserved benefits and restricted non-preserved benefits as paid as a non-commutable lifetime pension or annuity to assist with transition to retirement.
  • terminal illness or injury
    • lump sum benefit may be payable if condition is likely to lead to death within 12 months
  • rollovers and transfers
    • generally rollovers of monies into another super fund does not require a condition of release to be met.

• preservation age is the age at which you can start to draw down on the super fund and pay yourself annual benefits
• it is dependent upon your date of birth:

• new rules as of 20th Sept 2007.
• benefits paid out are tax free if aged over 60yrs unless the benefit is paid from an untaxed source such as a life insurance payout for which the policy claimed a tax deduction in which case tax is at 31.5%.
  • HOWEVER as of 2016 budget, the tax free income applies only to 1st $1.5m in super assets, thereafter it is 15%

• they require a minimal annual payment to be made (based on age - eg. 4% at under age 65yrs, rising to 6% by age 75yrs) with no maximum annual amount stipulated BUT cannot exceed 10% of the account balance
• they can only be commuted in particular circumstances
• they can’t have a residual capital value
• they can’t be paid to a non-dependant beneficiary

• they may be paid for life or for a fixed term or years
• they can only be commuted in particular circumstances
• certain non account-based income streams may have a residual capital value
• they can’t be paid to a non-dependant beneficiary

• subject to a with-holding tax of 21.5% if under preservation age
• subject to a with-holding tax of 16.5% if over preservation age but under age 60yrs AND exceeds “Low rate cap amount” of $150,000 (cap as at 2010)