Smarter Super - Invest in your future and make the most of your retirement
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Important Notice

This booklet gives information of a general nature and is not intended to be relied on by readers as advice in any particular matter.

You should consider consulting a financial adviser regarding how this information may apply to your own circumstances.

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UNDERSTANDING FEES, CHARGES AND TAXES

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FEES AND CHARGES

Fees and charges have a direct impact on the amount of money you have in superannuation. It's important to take the time to understand them before investing in a super fund.

While minimising fees is important, you also need to consider what value you're getting from the fees you're paying. The lowest cost fund will not necessarily be the fund that is most appropriate for your needs. A fund with higher fees might provide you with value-added benefits which can actually help your superannuation be worth more over time. For example, some funds might provide free financial planning services, higher levels of Ďautomatic acceptanceí insurance cover or investment options more appropriate for your needs.

Having said that, small differences in both investment performance and fees can have a substantial impact on your final superannuation balance.

To make it easier for you to understand and compare funds, super funds are required to show their fees and costs in a standard way. In the Product Disclosure Statement (PDS) for a super fund, you will find a table listing all significant fees and costs for the fund.

If you would like to find out more about the impact of fees based on your own circumstances, ASIC's FIDO website has a superannuation calculator to help you compare different fee options at www.fido.asic.gov.au.

This table will show fees such as:

Type of fee or cost
Charged for
Amount
How & when paid

Fees when your money moves in or out of the fund
(You may also incur a buy-sell spread when your money moves in or out of the fund)

Establishment fee

This is the fee to set up your account in the fund.

(This column could show a dollar amount, a percentage-of-assets based fee, or Not Applicable or Nil)

(This column could include when the fee will be charged and where it will be deducted from)

Contribution fee

This is the fee for the initial and every subsequent investment you make to the fund (or that may be made on your behalf e.g. by an employer).

Withdrawal fee

This is the fee charged for each withdrawal you make from the fund (including any installment payments and your final payment).

Termination fee

This is the fee when you close your account with the fund.

Management costs

Administration costs

These are the fees and costs for operating the fund. They include administration and other fees charged by the product issuer, distribution costs and other expenses incurred in operating the fund.

Investment costs

These are the fees and costs for investing the assets. They include fees charged by the product issuer, fees paid to external investment managers, and other expenses incurred in investing the assets (excluding transaction costs). (The amount you pay for specific investment options may be shown on another page.)

Additional service fees

Switching fee

This is the fee for when you switch between investment options. (You may also incur a buy-sell spread when switching between investment options.)

Adviser service fee

This is the fee for extra advice from your adviser about your investment. (An adviser may also be paid other amounts as commission out of one or more of the fees listed above.)

You might also be charged premiums for your insurance cover. If not included with the above information listing, this information should be detailed elsewhere in the fund's PDS.

TAX

While tax does apply to superannuation, it is deducted at significantly lower rates than tax on other investments.

Here's a summary of the tax advantages of superannuation:

  • Lower tax on contributions: Employer (e.g. the compulsory 9% employer contributions, plus salary sacrifice and additional employer contributions) and any voluntary tax deductible contributions you make which provide you with a personal tax deduction are subject to tax going in the super fund at 15%. This is substantially less than most marginal tax rates. From 1 July 2007, most self employed people can claim a full tax deduction for their super contributions. Contributions tax is not charged on any personal after-tax (or non-concessional) contribtuions.
  • Tax offsets: If your spouse earns less than $13,800 (total assessable income and reportable fringe benefits) a year you may be able to make contributions into their super account and you receive a tax offset up to $540 a year. For more information on spouse contributions, click here.
  • Lower tax on investment earnings: Complying super funds are taxed on their investment earnings at a lower rate than most other forms of savings. While the maximum rate of tax on super investment earnings is 15%, the actual tax rate paid by most super funds is usually much lower than this. Earnings on investments supporting a superannuation pension are tax free.
  • No tax or lower tax on benefits: If you are aged 60 and over and you are eligible to access your superannuation, benefits paid from a taxed super fund will be tax-free. This applies whether you take your super as an income stream or a lump sum. If you take your super as an income stream, you will not pay tax on the payments from the income stream. If you are less than 60 years of age when you draw on your super, the tax you pay will depend on what basis your contributions were made and whether you take the money as a lump sum or income stream. If you are between 55 and 59 years of age, tax concessions can reduce the amount of tax you have to pay on income streams.
 

TIP

Give your super fund your tax file number. This will help you keep track of your money and make sure you pay the lowest rate of tax on your contributions. If you donít this could significantly reduce your retirement savings and could potentially cause your insurance cover to lapse if you arenít able to top up your super account and it has insufficient funds to pay for the insurance. From 1 July 2007, if you start with a new employer and give them a tax file number declaration form, they must pass your tax file number to the super fund they deposit your money.

SPOUSE CONTRIBUTIONS

Contributing to your spouseís super is beneficial if your spouse has a low income or is not working. You could receive a tax offset of 18% if you contribute up to $3,000 for your spouse Ė that could mean an extra $540 for you.

Making a contribution on behalf of your spouse helps them build their retirement savings, which is particularly relevant if they are unemployed or temporarily taking time off work.

To qualify, your spouse must be:

  • Under 65 years of age, or;
  • 65 to 69 years of age and have worked at least 40 hours within 30 consecutive days during the financial year.

To claim the spouse contributions tax offset, both you and your spouse need to be Australian residents for tax purposes.

To receive the full offset, your spouse must have an assessable income and reportable fringe benefits of less than $10,800 in the financial year that you make the contribution on their behalf. To qualify for a partial offset, your spouse must have an assessable income and reportable fringe benefits between $10,800 and $13,800.

Your super fund or financial adviser can tell you how to set up an account in your spouseís name and make a contribution for them.

Did you know?

Most employees make contributions into a taxed super fund. Some employees are in funds that donít pay tax on the contributions, including public servants and some employees of large companies. Benefits paid from untaxed funds are still subject to tax, even if you access your super after age 60 years. If you are unsure if you are in an untaxed super fund, check with your super fund.

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