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  • Super funds

    Super funds are concessionally taxed savings vehicles that help individuals save for their retirement. The large super fund sector is highly regulated and scrutinised. Increased regulation and growing complexity in operating and administering super funds has also led to a significant decline in employer-sponsored corporate funds and consolidation more broadly in the retail and industry super fund sectors.

    Income tax for super funds is applied at a flat rate of 15% on taxable income, half that of the large company tax rate of 30%. Various exemptions and deductions will mean for most funds their taxable income is much lower than gross or assessable income. For example, income derived from assets used to support the current pensions paid to members, is known as exempt current pension income (ECPI), and is exempt from tax.

    The tax payable by large super funds for the 2015-16 income year was $8.2 billion. Tax payable is calculated by deducting both refundable and non-refundable tax offsets from gross tax. Franking credits are the main offsets for large super funds.

    Large super funds generally seek to comply with their tax obligations and we consider them to have relatively lower tax risk than other taxpayers. Almost half of total assessable income for large super funds in 2015–16 came from member contributions (not accounting for the effect of ECPI); generally we don't find compliance issues relating to member contributions.

    Where we do observe non-compliance, it generally arises from differences in law interpretation regarding:

    • over claiming of Foreign Income Tax Offset (FITO)
    • incorrect use of the CGT discount and the capital losses offset provision in respect of gains from non-taxable Australian property of a foreign trust
    • over claiming of franking credits.

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      Last modified: 10 Jan 2020QC 61086