Calculating notional taxed contributions

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Calculating notional taxed contributions

Transcript Of Calculating notional taxed contributions

Calculating notional taxed contributions

This fact sheet provides general information for members of the Contributory Scheme.
What are ‘notional taxed contributions’?
If you are a Contributory Scheme member, notional taxed contributions are calculated on your behalf and are made up of notional employer (unfunded) contributions and any salary sacrifice contributions.
Notional taxed contributions are concessional contributions and RBF uses a prescribed formula to calculate the value of concessional contributions. The value of your notional taxed contributions is reported to the Australian Taxation Office on an annual basis by RBF.
What are concessional contributions?
Concessional (before tax) contributions include:
1 your calculated notional taxed contributions including employer contributions and any salary sacrifice contributions to the Contributory Scheme; plus
2 any employer super contributions your employer pays to another super scheme on your behalf including the following contributions:
a salary sacrifice contributions;
b Superannuation Guarantee contributions;
c employer productivity and industrial award super contributions;
3 any personal contributions you have made for which you have claimed a tax deduction1; and
4 the excess untaxed component (if any) of any rollover super benefit received by a super fund on your behalf.
1 Strict eligibility rules govern the tax deductibility of personal super contributions. RBF recommends that members seek advice from a taxation professional.

Concessional contribution caps
There is a limit on the amount of concessional contributions you can make each year to your super. This is called the concessional contributions cap. Your concessional contributions cap for a financial year is determined by your age as at 30 June in the financial year which the contributions were paid.
The concessional contributions cap for 2021-22 financial year are:

Age For all ages

Concessional contribution cap $27,500

If your total concessional contributions in any financial year exceeds the concessional contributions cap:
1 the amount of your excess concessional contribution is included in your assessable income for the financial year and is taxed at your marginal tax rate plus the Medicare Levy; and
2 you will receive a 15% tax-offset for the contributions tax you have already paid on your excess concessional contributions; and
3 you may be liable to pay an excess concessional contributions charge.
The Australian Taxation Office will issue you an excess contributions tax notice of assessment. You can choose to pay any excess concessional contributions tax yourself or you can choose to have the tax paid from your super by providing a voluntary release authority to your accumulation scheme super fund. The voluntary release authority cannot be provided to RBF, as we operate defined benefit schemes only and any benefits are still accruing.
In addition, any excess concessional contributions may also be counted towards your non-concessional contributions cap for the financial year.
Non-concessional contributions are contributions you make to your super account from after-tax money, such as personal or spouse contributions. Non-concessional contributions are subject to a cap and you will incur additional tax if you exceed the non-concessional contributions cap.
For further information about tax on excess contributions, please refer to the Australian Taxation Office website at www.ato.gov.au.

Calculating notional taxed contributions • 1

Australian Taxation Office grandfathering rules
The Australian Taxation Office has special rules (called grandfathering rules) to determine the value of concessional contributions in relation to defined benefit schemes. If your Contributory Scheme notional taxed contributions for a financial year are greater than your concessional contributions cap ($27,500) and you satisfy the grandfathering rules, RBF will treat your notional taxed contributions as being equal to the amount of the concessional contributions cap ($27,500).
You will satisfy the grandfathering rules if you were a member of the Contributory Scheme as at 12 May 2009.
Please note: Eligibility for the Australian Taxation Office grandfathering rules may be lost if your salary increases by more than 50% in one year and 75% over three years and the increase is on a non-arms length basis with the primary purpose being to achieve an increase in super benefits. For more information regarding loss of eligibility due to salary increases, please call the RBF Enquiry Line on 1800 622 631.
How your notional taxed contribution impacts on your concessional contributions cap
If your calculated notional taxed contribution (using the RBF formula shown in this fact sheet) is less than the relevant concessional contributions cap, RBF will report your notional taxed contributions for the Contributory Scheme as the amount calculated for that financial year.
If your calculated notional taxed contribution is greater than the concessional contributions cap ($27,500) and you satisfy the eligibility criteria for the grandfathering rules (you were a member of the Contributory Scheme as at 12 May 2009), RBF will report your Contributory Scheme notional taxed contributions are equal to the amount of concessional contributions cap for the financial year ($27,500).
This means that you will not exceed the concessional contributions cap as an eligible Contributory Scheme member provided you do not have any other concessional contributions outside the Contributory Scheme.
However if you are a member of more than one super fund and concessional contributions are paid to another one of those other funds, your total concessional contributions for a financial year will be a combination of your:
(a) Contributory Scheme notional taxed contributions; plus
(b) any notional taxed contributions arising from your membership with another defined benefit fund; plus
(c) any concessional contributions paid to your accumulation (or defined contribution) fund, such as an industry fund or master trust.
If your total combined notional taxed contributions are greater than or equal to the concessional contributions cap, and have had concessional contributions paid to your

accumulation fund in ((c) above), the Australian Taxation Office will determine that the concessional contributions paid to your accumulation fund ((c) above), are excess concessional contributions. Your excess concessional contributions will be included in your assessable income and taxed at your marginal tax rate plus the Medicare Levy. You may also have to pay an excess concessional contributions charge.
Note: Members who do not satisfy the eligibility requirements for the grandfathering rule will not have their notional taxed contribution reduced to the concessional contributions cap.

Calculating notional taxed contributions

As you are a member of the Contributory Scheme, RBF uses the following formula to calculate your notional taxed contributions:

NTC2 = [1.2 x (NER x FAS(1) x FTE% x D/365)] + CON SALSAC

Where

NTC

Your notional taxed contribution for a financial year

NER

The new entrant rate determined by the Actuary.

If your membership category is ‘Post 94 members’ then NER = 6%

If your membership category is ‘Pre 94 members’ then NER = 7%

If you are a 2.5% contributor then NER = 8%

FAS(1)

Your Final Average Salary (1) as at 1 July of the relevant financial year (you can find this on your Member Benefit Statement).

FTE%

Your full-time equivalent percentage for the financial year.

D

Actual number of days of accrued membership

for the financial year.

CON

Your total gross salary sacrifice contributions paid to

SALSAC the Contributory Scheme during the financial year.

2 Please note this version of the formula has been simplified to enable you to estimate your Contributory Scheme notional taxed contributions. No allowance is made for concessional contributions to other super funds on your behalf. We recommend that you seek professional taxation and financial advice that has regard to your personal circumstances.

If you contribute salary sacrifice contributions to the Contributory Scheme you can view these contributions for the financial year to date by logging in to the member secure website and going to the ‘Account summary’ section.
To calculate the amounts you are likely to contribute as salary sacrifice to the Contributory Scheme for the full financial year, you can apply the following calculation:
CON SALSAC = FAS(1) x FTE% x gross salary sacrifice rate %

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Where gross salary sacrifice rate % is determined by the table below:

Your contribution rate %

Gross salary sacrifice rate %

5%

5.88%

6%

7.06%

7%

8.24%

8%

9.41%

9%

10.59%

10%

11.76%

11%

12.94%

12%

14.12%

13%

15.29%

14%

16.47%

15%

17.65%

e.g. if a Contributory Scheme member salary sacrifices 15% of their salary, the gross salary sacrifice rate to be included in the above formula would be 17.65%.

If you elect to improve your Contributory Scheme benefit by:
• upgrading past contributory service to a higher contribution rate;
• purchasing eligible periods of non-contributory or past service; or
• by removing your service penalties;
an actuarial adjustment may be applied to your final notional taxed contributions amount.

Examples of concessional contribution calculations
Each of the following worked examples are for the 2021-22 financial year.
Example 1 – Member A • salary sacrifices to the Contributory Scheme • joined the Contributory Scheme prior to 12 May 2009
therefore grandfathering rules apply
Pre 1 July 1994 member Full-time employee Age 45
Salary sacrifice contributions paid to the Contributory Scheme for the entire year at the contribution rate of 5%.
FAS(1) is $105,000 as at 1 July 2021.
NTC = [1.2 x (FAS(1) x NER x FTE x D/365)] + CON SALSAC
NTC = [1.2 x ($105,000 x 7% x 100% x 365/365)] + ($105,000 x 5.88%)
NTC = $8,820 + $6,176
NTC = $14,996

Member A’s notional taxed contributions are $14,996 which is less than the concessional contributions cap of $27,500 for the 2021-22 financial year.
RBF will report to the Australian Taxation Office that Member A’s notional taxed contributions are $14,996 for the 2021-22 financial year.
If Member A also contributed salary sacrifice contributions of $20,000 to another super fund during the financial year, the other super fund will separately report this contribution data to the Australian Taxation Office.
The Australian Taxation Office would calculate Member A’s total concessional contributions for the 2021-22 financial year as $34,996 ($14,996 + $20,000) which is greater than the concessional contributions cap of $27,500.
Member A would have excess concessional contributions of $7,496. The full amount of the excess concessional contributions will be added to Member A’s assessable income for the financial year and taxed at Member A’s marginal tax rate including the Medicare Levy. Member A will be eligible to claim a tax-offset of $1,124 (15% of the excess concessional contributions).
If Member A’s marginal tax rate including the Medicare Levy is 39%, then the additional tax on the excess concessional contributions would be $1,799 ($7,496 x 39% less $1,124).
Example 2 – Member B • salary sacrifices to the Contributory Scheme • joined the Contributory Scheme prior to 12 May 2009
therefore grandfathering rules apply
Post 1 July 1994 member Full-time employee Age 48
Salary sacrifice contributions paid to the Contributory Scheme for the entire year at the contribution rate of 15% of salary.
FAS(1) is $150,000 as at 1 July 2021.
NTC = [1.2 x (FAS(1) x NER x FTE x D/365)] + CON SALSAC
NTC = [1.2 x ($150,000 x 6% x 100% x 365/365)] + ($150,000 x 17.65%)
NTC = $10,800 + $26,471
NTC = $37,271
Member B’s notional taxed contributions are more than the concessional contributions of $27,500 for the 2021-22 financial year.
RBF will report Member B’s notional taxed contributions are $27,500 for the 2021-22 financial year (in line with the concessional cap).
If Member B also contributes salary sacrifice contributions of $15,000 to another super fund during 2021-22 financial year, the other super fund will separately report this contribution data to the Australian Taxation Office.

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The Australian Taxation Office would calculate that Member B’s total concessional contributions for the 202122 financial year are $42,500 ($27,500 + $15,000) which is more than the concessional contributions cap of $27,500.
Member B would have excess concessional contributions of $15,000. The full amount of the excess concessional contributions will be added to Member B’s assessable income for the financial year and taxed at Member B’s marginal tax rate including the Medicare Levy. Member B will be eligible to claim a tax-offset of $2,250 (15% of the excess concessional contributions). If Member B’s marginal tax rate including the Medicare Levy is 39%, then the additional tax on excess concessional contributions would be $3,600 ($15,000 x 39% less $2,250).
Example 3 – Member C • salary sacrifices to the Contributory Scheme • joined the Contributory Scheme after
12 May 2009 therefore the member is not eligible for the grandfathering rule
Post 1 July 1994 member Married female employee joined Contributory Scheme 1 July 2010 Full-time employee Age 48

Salary sacrifice contributions paid to the Contributory Scheme for the entire year at the contribution rate of 15%.
FAS(1) is $150,000 as at 1 July 2021.
NTC = [1.2 x (FAS(1) x NER x FTE% x D/365)] + CON SALSAC
NTC = [1.2 x ($150,000 x 6% x 100% x 365/365)] + ($150,000 x 17.65%)
NTC = $10,800 + $26,471
NTC = $37,271
Member C’s notional taxed contributions are more than the concessional contributions of $27,500 for the 2021-22 financial year.
RBF will report that Member C’s notional taxed contributions are $37,271 for the 2021-22 financial year.
Member C would have excess concessional contributions tax of $9,771. The full amount of the excess concessional contributions will be added to Member C’s assessable income for the financial year and taxed at Member C’s marginal tax rate including the Medicare Levy. Member C will be eligible to claim a tax-offset of $1,465 (15% of the excess concessional contributions).
If Member C’s marginal tax rate including the Medicare Levy is 39%, then the additional tax on excess concessional contributions would be $2,345 ($9,771 x 39% less $1,841).

© July 2021 The Superannuation Commission (ABN 96 573 090 182) as trustee of the Retirement Benefits Fund (ABN 51 737 334 954).
This fact sheet contains general information only. It is not intended to be, and should not be relied upon as legal, financial or other advice. It has been prepared without taking into account your personal objectives, financial situation or needs. Consider whether this information is appropriate to your circumstances and read any relevant RBF documentation available at www.rbf.com.au before making a decision. We also recommend that you consider talking to a financial adviser.
Every care has been taken in providing accurate and up-to-date information in this fact sheet. However, things may have changed since this fact sheet was published and some of the information may no longer be correct. If there are mistakes or omissions in the information, we reserve the right to correct those errors or omissions. The governing rules of RBF will prevail over any misstatement in this fact sheet.
The privacy and confidentiality of your personal information is important to RBF. We hold your personal information securely and use it only for the purposes described in the RBF ‘Privacy Policy’, available on the RBF website at www.rbf.com.au

Contacting RBF
Contact RBF if you would like additional information or assistance.

RBF Enquiry Line:

1800 622 631 or +61 2 8571 6868 (international)

Visit:

www.rbf.com.au

Write:

RBF, Reply Paid 89418, PARRAMATTA NSW 2124

Office:

Ground Floor, 21 Kirksway Place, Hobart
Level 3, Henty House, 1 Civic Square, Launceston

CO/S/00368 (V4-07/21) Issued by the Superannuation Commission (ABN 96 573 090 182) as trustee of the Retirement Benefits Fund (RBF) ABN 51 737 334 954.

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