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From 1 July 2009, changes apply to super co-contributions, income tests and concessional contributions caps. For a summary of these changes, refer to Changes to super for individuals.
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Here is a useful reference guide to some of the terms we use with Simpler Super.
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Please note that these are not formal legal definitions, but a way to help you understand Simpler Super in plain language. See www.ato.gov.au/super for more information.
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ADF
Approved deposit fund. This is a fund that accepts eligible termination payments after you take early retirement, change jobs or are retrenched. Contributions cannot be made directly to an ADF.
After-tax contributions
Contributions you make with after-tax money, such as your take-home pay. These are also called ‘non-concessional’, ‘personal” or ‘undeducted’ contributions.
Age-based limits
In 2006–07, there is a limit on the amount of super contributions you can claim as a deduction. This limit is based on your age on the day that the last contribution was made during the income year. Age-based limits and reasonable benefit limits will be replaced by contribution caps from 1 July 2007.
Age pension
A government payment to seniors who are unable to support themselves in their retirement.
Allocated pension
A regular income provided by a superannuation fund.
Annuity
A series of regular payments (fortnightly, monthly or yearly), usually purchased with a lump sum from a life insurance company.
Assets test taper rate
The rate at which some Centrelink payments are reduced by the value of a person’s assets, and in some cases, by their partner's assets.
Average Weekly Ordinary Times Earnings (AWOTE)
The average wage of employees in Australia, published by the Australian Bureau of Statistics.
Before-tax contributions
Contributions to super that are made before tax is taken out of your wage. These can be made by employers for superannuation guarantee and also include salary sacrifice contributions. Contributions made by the self-employed, for which they can claim a tax deduction are also included.
May also be called ‘concessional’, ‘taxable’ or ‘deducted’ contributions.
Benefits
The amount you are paid as a superannuation income stream, lump sum or a combination.
Benefits tax
This is the tax paid on benefits taken from superannuation, either by way of a lump sum or a pension. From 1 July 2007, if you are aged 60 or over, benefits you receive from a 'taxed source' will be tax free and not subject to this tax.
Complying superannuation fund
A superannuation fund that receives concessional tax treatment.
Concessional contributions
Contributions to super that are made before tax is taken out of your wage. Includes superannuation guarantee contributions made by employers, salary sacrifice contributions and contributions by the self-employed, for which they can claim a tax deduction. These contributions are taxed at a lower “concessional” rate of 15% which is often referred to as 'contributions tax'.
Concessional contributions cap
From 1 July 2007 there will be a limit on concessional contributions of $50,000 (indexed) a year. For people 50 or over, there will be a transitional limit of $100,000, (not indexed) but only until 30 June 2012. Contributions in excess of the limit will be subject to the excess concessional contributions tax.
Contributions tax
The 15% tax payable on some amounts paid into a superannuation fund and the earnings and investments held in the fund. Your super fund usually reduces your superannuation account by your share of this tax.
Deducted contributions
Superannuation contributions which you (if you are self-employed) or your employer claim as an income tax deduction.
Defined benefit fund or scheme
Fund where a member's benefit does not depend solely on contributions and earnings, but on other factors such as years of service and average salary.
Dependants
People who need your financial or domestic support. These can include a spouse, a de facto, a child, or a person who is in your care.
Early retirement scheme
An early retirement scheme is a scheme approved by us, which allows you to offer an incentive for certain groups of employees to retire early or resign.
Eligible termination payment
A lump sum benefit made before 1 July 2007 by:
- a superannuation fund to a person because they, or another person, were a member of a superannuation fund, approved deposit fund (ADF) or a depositor with a retirement savings account (RSA) or,
- an employer to an employee, as a result of the termination of employment or,
- a Superannuation fund or an employer after the death of the person who was a fund member or an employee.
ETPs can generally be rolled over into a superannuation fund, ADF or RSA if the recipient elects to do so.
An ETP also includes a lump sum paid when a pension or annuity is converted (commuted) to cash or the residual capital value is paid at the end of a pension or annuity term.
Employment termination payment
A lump sum payment made to you when your employment is terminated. These payments must be made within 12 months of termination, and usually receive concessional income tax treatment.
Employment Termination Payment cap amount
This is a limit on the amount of an ETP that qualifies for a lower rate of tax.
Employment Termination Payment – Tax-free component
The tax-free component of an employment termination payment is so much of the payment as consists of the following:
- the invalidity segment of the payment, and
- the pre-July 83 segment of the payment.
Employment Termination Payment Taxable component
The taxable component of an employment termination payment is the amount of the payment less the tax free component of the payment.
Employer contributions
Payments made by your employer (or someone associated with your employer) to your super fund. These can include superannuation guarantee obligations, plus any salary sacrifice amounts.
Excess concessional contributions
Before-tax contributions to your super fund which go over a yearly cap. This is $50,000 a year (indexed) for most people. If you’re over 50 between 1 July 2007 and 30 June 2012, the cap is $100,000.
Excess non-concessional contributions
After-tax contributions to your super fund which go over a cap of $150,000 a year. Excess concessional contributions (see above) are also counted towards this limit.
Excess concessional contributions tax
A tax of 31.5% on your contributions over the cap. You are personally liable for this tax, and you can ask your super fund to release money to pay it.
Excess non-concessional contributions tax
A tax of 46.5% on your contributions over the cap. You are personally liable for this tax, and you must ask your super fund to release an amount of money equal to the tax.
Funded defined benefit fund
A fund that receives employer contributions, usually annually. These contributions are not allocated to any individual members, but are combined in the fund. Personal contributions may also be made to these funds.
Income test
One of the tests used to work out whether a person is entitled to receive government benefits. It calculates the amount of assessable income that the person earns, which can affect their payment rate.
Life benefit termination payment
A life benefit termination payment is an employment termination payment made in consequence of a person’s termination of employment other than as a result of death.
Lost member
Where a fund can’t contact a member who has not yet reached eligibility age, that member is referred to as a ‘lost member’ (other conditions also apply).
All funds must report lost members to the Tax Office – but a lost member’s super remains in their super fund. If the balance of the account which is found is less than $200 the member may now request that it be paid to them tax-free or they can consolidate it with other super accounts they hold
Refer to Lost members register - for superannuation providers
Member contributions
Personal contributions to a superannuation fund. These can be undeducted personal contributions or deductible personal contributions.
Non-concessional contributions
These are amounts that count toward your non-concessional contributions cap, i.e. personal contributions which are not claimed as an income tax deduction. These include contributions made by your spouse to your superannuation account.
Non-concessional contributions cap
From 1 July 2007, non-concessional contributions made to super will be capped at $150,000, or $450,000 over a three-year period.
Notional taxed contributions
Since contributions into defined benefit funds are not always linked to individual members, a ‘notional’ amount will be calculated to determine if you have gone over the cap for that year.
Pension age
65 for men and 63 1/2 for women, gradually rising to 65 for women by 2014.
Personal contributions
Contributions you make to your superannuation account including from money you have paid tax on, such as your take-home pay and contributions which you don’t claim a tax deduction for.
Preservation age
The age when you can access your superannuation benefits. Preservation age will rise from 55 to 60 between 2015 and 2024. This will mean that for someone born before 1 July 1960, their preservation age is 55 years, while for someone born after 30 June 1964, their preservation age will be 60.
Reasonable benefit limits (RBLs)
A cap on the amount of superannuation and similar benefits that you can receive on a concessionally-taxed basis up until 30 June 2007. RBLs will be abolished from 1 July 2007.
Release authority
A Tax Office document that authorises a super fund to release an amount from your superannuation account. Often used to pay excess contribution tax.
Reversionary income stream
An income stream which, on your death, continues to be paid to your nominated beneficiary.
Roll-over
A roll over is:
- the transfer of all or part of an employer ETP into a superannuation fund or
- a transfer of a member’s capital value from one superannuation fund to another or to a new product within the same fund.
RSAs
Retirement savings accounts.
RoCS
Register of Complying Superannuation funds held by the Tax Office at www.ato.gov.au.
Salary sacrifice contributions
When you arrange for your employer to put a part of your before-tax salary into your superannuation account for you. These contributions count toward your concessional contributions cap.
Statement of release authority
A statement from a superannuation provider, which documents a benefit payment paid because the provider received a release authority.
Superannuation benefit
The amount you are paid either as a superannuation income stream, lump sum or combination.
Superannuation income stream
A regular series of payments from a superannuation fund.
Superannuation interest
Superannuation interest means:
- an interest in a superannuation fund
- an interest in an approved deposit fund
- an interest in an RSA, or
- an interest in a superannuation annuity.
A superannuation interest is generally any amount, benefit or entitlement which a member holds in a fund.
The total value of a member’s superannuation interest at a particular time is the total amount of all superannuation lumps sums, benefits or entitlements that could be payable from the interest at a particular time. Typically this is the member’s total account balance in the fund.
Superannuation lump sum
Superannuation lump sum is the benefit taken as a lump sum payment from a superannuation plan, rather than as an income stream.
Super Co-contribution
A payment made by the government into your super fund. The government pays $1.50 for every $1 you make in personal contributions for which you have not claimed a tax deduction, up to a maximum of $1,500. The payment reduces by 5 cents for every dollar you earn over $28,000.
Super Guarantee (SG) contributions
The before-tax minimum level of superannuation contributions that an employer must contribute for eligible employees. The rate is currently 9%.
Taxable contributions
Contributions to a superannuation fund that are subject to the 15% 'contributions tax'. These are generally ‘concessional contributions’ including employer contributions and salary sacrifice contributions.
Taxed source
A ‘taxed source’ is generally a super fund where tax is paid on contributions and earnings. Most people have their superannuation accounts in taxed funds.
Tax file number (TFN)
The unique identifying number issued to you by the Tax Office.
Transitional concessional contributions cap
If you are aged 50 or over between 1/7/2007 and 30/6/2012, you or your employer can make concessional contributions of up to $100,000 a year.
Transitional non-concessional contributions cap
Between 10 May 2006 and 30 June 2007 you can make up to $1 million in non-concessional contributions without being liable for excess non-concessional contributions tax. Employer contributions above your aged-based deduction limit will also count towards this cap.
Transitional release authority
If you made contributions in excess of the $1 million transitional non concessional contributions cap between 10 May and 6 December 2006, you will be liable for a tax of 46.5% on the excess. This form enables your fund to release the excess funds to you, so you do not have to pay the tax. The form will be issued to you by the Tax Office when you lodge a Request for transitional release authority with the Tax Office by 30 June 2007.
Transition to retirement
Since 1 July 2005, people who have reached their preservation age can withdraw part of their superannuation benefits as an income stream while they are still working. This income stream can be no more than 10% of their superannuation account balance per year.
Unclaimed super
Unclaimed super is super that’s ready to be paid out to the member now, generally because the member has reached eligibility age – currently 65 years – and can’t be contacted or they are deceased (other conditions also apply).
Depending on the type of fund, funds must report and pay unclaimed super to us or the relevant state or territory authority – unclaimed super should not remain in the fund.
Refer to:
Unclaimed super - information for superannuation providers, and
Unclaimed super - information for individuals
Undeducted contributions
Money you have contributed to superannuation for which a tax deduction has not been claimed.
Unfunded defined benefit fund
A fund in which member benefits are not financed until just before they become payable to the member. At this time the benefits are generally sourced from the employer of the member. These funds mostly apply only to government employees.
Untaxed source
An ‘untaxed’ source is typically a government fund for public servants. As amounts have not been accumulating in a fund, contributions and earnings taxes have not been paid.
Work test
A test that requires a person to have worked at least 40 hours within 30 consecutive days in a financial year. People who are aged between 65 and 74 must meet the work test to be allowed to make personal superannuation contributions.
Last Modified: Friday, 21 August 2009
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