SUPERANNUATION

Question 1

Australian Taxation Office defines super as “money set aside during your working life for when you retire.” Which of the following general statements about the key components of Australia’s superannuation system is correct?

a. Contributions can be put into super by the member and / or the member’s employer

b. Money in industry super is automatically invested & can be changed by the member

c. A concessional rate of tax, nominally 15%, applies to superannuation

d. At retirement, money can be withdrawn from super as a lump sum or income stream

e. All of the above

Question 2

Which of the following statements about superannuation regulation and supervision is INCORRECT?

a. SMSFs are regulated by the Australian Taxation Office

b. Public funds and industry funds are regulated by APRA

c. Corporate superannuation funds are regulated by ASIC

d. A regulated super fund means that the fund is regulated under the Superannuation Industry (Supervision) Act 1993

Question 3

Which of the following statements is INCORRECT?

a. Concessional contributions are before-tax contributions

b. Non-concessional contributions are after-tax contributions

c. There are caps that limit the amount of concessional and non-concessional contributions that can be made into super in any financial year

d. Voluntary superannuation contributions are tax deductible

Question 4

Which of the following statements is CORRECT?

a. The member / employee bears the investment risk in their superannuation fund, both in accumulation phase and in retirement phase if an account-based pension is commenced

b. Fund earnings on assets transferred into the retirement phase to support the pension income stream are tax-free

c. Regardless of how much super a member has accumulated, there is currently a cap of $1.6 million that can be transferred into the retirement phase (known as the transfer balance cap)

d. Once a superannuation member starts a pension, a minimum amount is required to be paid each year; and that minimum amount depends on age of the member

e. All of the above

Question 5

Which of the following statements about the compulsory Superannuation Guarantee (SG) system is INCORRECT?

a. Employers are required to make superannuation contributions on behalf of employees who are aged over 18 and who earn more than $450 in a month

b. The current super guarantee percentage (until 30 June 2021) is 9.5% of gross wages or salary (ordinary time earnings)

c. Employees are not able to nominate the fund to receive employer superannuation guarantee contributions. Instead the employer chooses a default fund set out in the relevant award (if applicable)

d. Employers who do not pay the correct superannuation contributions by the due date must pay the (penalty) superannuation guarantee (SG) charge.

Question 6

Generally, you must reach preservation age before you can access your superannuation.  Which of the following statements about preservation age is INCORRECT?

a. A person born before 1 July 1960 has a preservation age of 55 years

b. A person born on or after 1 July 1964 has a preservation age of 60

c. A person born between 1 July 1961 – 30 June 1962 has a preservation age of 57

d. A person born between 1 July 1963 – 30 June 1964 has a preservation age of 58

Question 7

A person (superannuation member) cannot access their superannuation unless they meet a so-called ‘Condition of Release’.  Death is regarded as a condition of release and the superannuation proceeds benefits the deceased’s family.  All other conditions of release apply to releasing super while the member is alive.

Which of the following would be considered as an early release of superannuation?

a. The member suffers severe financial hardship

b. The member has reached their preservation age and permanently retires

c. The member ceases an employment arrangement on or after the age of 60

d. The member is 65 years of age, even if they haven’t retired

Question 8

Which of the following statements is CORRECT?

a. Once a condition of release has been met, all withdrawals from super are tax-free

b. If a member dies, a lump sum death benefit paid to a spouse is tax-free

c. All superannuation benefits withdrawn under the age of 60 are generally tax-free

d. All superannuation benefits withdrawn over the age of 60 are generally taxable

Question 9

A member may nominate a beneficiary to receive their superannuation benefit, including insurance benefits, in the event of death.  Which of the following people or class of people CANNOT be validly nominated to receive a superannuation death benefit?

a. A spouse, including same sex spouse

b. A person financially dependent on the member at time of death

c. A brother or sister

d. A child, including an adult child

Question 10

Which of the following statements about ways to boost superannuation savings is CORRECT?

a. Sacrificing more of your gross salary (above the mandatory SG level) into superannuation can be a tax-effective way to boost retirement savings

b. The Super Co-contribution Scheme is designed to help eligible lower income earners boost their retirement savings

c. Making voluntary (after-tax) contributions to superannuation boosts retirement savings; there is no tax on these non-concessional contributions and the subsequent investment earnings are concessionally taxed at 15%

d. If you are over 65 and you’ve owned your home for more than 10 years and you sell it, you may be eligible to contribute up to $300,000 from the sale to your super

e. All of the above

ANSWERS

1e

2c – All super funds are regulated by APRA except SMSFs

3d – Voluntary contributions are after-tax non-concessional contributions.  They are not taxed in the super fund, nor are they tax deductible

4e

5c – Most employees have the right to choose where their employer puts the contributions on their behalf.  It’s only if the employee doesn’t choose, the employer chooses a default fund set out in the relevant award (if applicable)

6d – A person born between 1 July 1963 – 30 June 1964 has a preservation age of 59, not 58

7a – Severe financial hardship, terminal medical condition and permanent incapacity are among the reasons for early release of super.  However, there can be limits on amounts withdrawn.

8b – Whether benefits withdrawn from super are taxable depends on the age of the member.  Generally, benefits withdrawn under the age of 60 are potentially taxable, whilst benefits withdrawn over the age of 60 are generally tax-free if withdrawn from a taxed source

9c – Unlike nominating beneficiaries from a non-superannuation life insurance policy, there is only a very small number of people who can be validly nominated from a super fund.  It is generally confined to spouse, children and anyone financial dependent at time of death.  Parents and siblings aren’t valid nominations.  This makes it tough for young single people to make a valid nomination.  The only way they can do it is to arrange a will and nominate their Legal Personal representative (Executor of the will) to receive 100% of the benefit.  It effectively directs a death benefit in to the deceased’s estate.

10e