• Super surcharge – information for individuals

    Two types of super surcharge may apply to people on higher incomes:

    • super contributions surcharge – a tax on certain contributions made to a super fund (usually employer and personal deductible contributions)
    • termination payments surcharge – a tax on certain components of an employment termination payment taken in cash.

    The super surcharge was abolished in the 2005–06 Federal Budget. It does not apply to any super contributions made, or termination payments received, on or after 1 July 2005.

    Any super surcharge obligations you have will only be for:

    • super contributions made between 20 August 1996 and 30 June 2005
    • termination payments you received between 20 August 1996 and 30 June 2005.

    Although super surcharge is abolished, any current and future liabilities remain payable. We may still issue original or amended surcharge assessments for the financial years 1997–2005.

    Super contributions surcharge

    Surchargeable contributions

    Surchargeable contributions have a surcharge applied if your adjusted taxable income is above the lower limit for the relevant financial year.

    If you're a member of an accumulation fund, surchargeable contributions include:

    • contributions made by your employer for your benefit (including additional contributions being paid because of a salary sacrifice arrangement)
    • personal contributions you claimed a tax deduction for
    • the post 20 August 1996 portion of an employer eligible termination payment rolled over on or after 1 July 1997
    • any amount allocated to your account on or after 1 July 1997 that was reported by your fund as an allocated surplus amount.

    If you're a member of a defined benefit fund, your surchargeable contributions are determined by your fund's actuary. They calculate the value of the benefits and expenses relating to your membership for a financial year.

    Personal contributions, for which no income tax deductions are claimed, are not surchargeable contributions. These are also referred to as undeducted contributions.

    When the surcharge applies

    For the financial years 1997–2005, the surcharge applies to your surchargeable contributions if your adjusted taxable income is higher than the lower income amount. Generally, your adjusted taxable income is your taxable income plus reportable fringe benefits amounts plus surchargeable contributions.

    We get some of our information about you from your tax return. These details include your taxable income, reportable fringe benefits amounts and personal contributions you claimed an income tax deduction for.

    We get our information about your surchargeable contributions from an annual statement lodged by your super fund. This statement reports the contributions they received for you in the financial year.

    When we have this information, and your adjusted taxable income is higher than the lower income amount for the relevant year, we calculate the surcharge to apply to your surchargeable contributions.

    Table 1: Lower and higher income amounts

    Income year

    Lower income amount

    Higher income amount

    A
    (divisor used in formula)

    2005–06 onward

    Surcharge has been abolished

     

    2004–05

    $99,710

    $121,075

    1,709.20000

    2003–04

    $94,691

    $114,981

    1,399.31034

    2002–03

    $90,527

    $109,924

    1,295

    2001–02

    $85,242

    $103,507

    1,219

    2000–01

    $81,493

    $98,955

    1,165

    1999–2000

    $78,208

    $94,966

    1,118

    1998–99

    $75,856

    $92,111

    1,084

    1997–98

    $73,220

    $88,910

    1,046

    1996–97

    $70,000

    $85,000

    1,000

    Your adjusted taxable income is compared to the lower and higher income amounts to determine the rate of surcharge that applies to your surchargeable contributions. The number in column A is used in the calculation.

    If your adjusted taxable income is equal to or below the lower income amount for the financial year, you don't pay a surcharge.

    See also:

    Adjusted taxable income

    Two methods are used to calculate your adjusted taxable income:

    • first case method
    • second case method.

    Follow these steps to choose the correct method to calculate your adjusted taxable income.

    Did you receive an eligible termination payment from your employer?

    Reduced amount of an employment termination payment

    The reduced amount of an eligible termination payment is the amount remaining after you deduct any:

    • post June 1994 invalidity component
    • capital gains tax (CGT) exempt component
    • part of the payment made from an employee share acquisition scheme.

    First case method

    To calculate your adjusted taxable income:

    Adjusted taxable income

    =

    Your taxable income

     

    Super fund and rollover fund eligible termination payments

     

    Lump sum payments for unused long service leave (for post 15 August 1978 service) and unused annual leave received when you ceased employment because of bona fide redundancy, invalidity or under an approved early retirement scheme

     

    +

    Family trust distributions exempt from income tax because the trust paid the tax

     

    +

    Distributions exempt from income tax because ultimate beneficiary non-disclosure tax was paid

     

    +

    Your total surchargeable contributions

     

    +

    Reportable fringe benefit amount shown on your payment summary (for income years ended 30 June 2000 onwards)

     

    Example: Using the first case method

    Jamal works as an environmental engineer.

    • His taxable income for the 2001–02 financial year was $72,000.
    • His employer paid super contributions of $6,500 into his self-managed super fund.
    • Jamal's employer also provides him with a company car.
    • The reportable fringe benefit amount of the company car provided to Jamal is $8,000.

    Jamal's adjusted taxable income is the total of:

    Taxable income

    $72,000.00

    Less: Super fund eligible termination payments

    $0.00

    Less: Applicable unused annual and long service leave payments

    $0.00

    Plus: Family trust distribution amounts

    $0.00

    Plus: Ultimate beneficiary non-disclosure tax

    $0.00

    Plus: Surchargeable contributions

    $6,500.00

    Plus: Reportable fringe benefit amount

    $8,000.00

    Adjusted taxable income

    $86,500.00

    As Jamal's adjusted taxable income is greater than the lower income amount of $85,242 for the 2001–02 financial year, he has a super surcharge liability.

    End of example

    Second case method

    To calculate your adjusted taxable income:

    Adjusted taxable income

    =

    Your taxable income

     

    +

    Family trust distributions exempt from income tax because the trust paid the tax

     

    +

    Distributions exempt from income tax because ultimate beneficiary non-disclosure tax was paid

     

    +

    Your total surchargeable contributions (excluding any post 20 August 1996 portion of an employer eligible termination payment that was rolled over)

     

    +

    Reportable fringe benefit amount shown on your payment summary (for income years ended 30 June 2000 onwards)

     

    +

    The amount we arrive at by doing the eligible termination payment calculation (the formula to calculate this is below)

     

    The assessable amount of all eligible termination payments

     

    Lump sum payments for unused long service leave (for post 15 August 1978 service) and unused annual leave received when you ceased employment because of bona fide redundancy, invalidity or under an approved early retirement scheme

    Your employment termination payment amount

    Use this formula to work out your employment termination payment amount:

    Taxable portion of each employment termination payment x number of
    service days after 20 August 1996*
    ________________________________________________________
    Total number of eligible service days

    * If the number of service days after 20 August 1996 is greater than 365 days, 365 days is used instead.

    Calculating this figure ensures a maximum of one year's worth of accrual of your employer eligible termination payments is included when we work out your adjusted taxable income.

    Example: Using the second case method

    Mary began work on 1 May 1991.

    She stopped work on 24 August 2003 and was paid an employer eligible termination payment of $58,000, which she rolled over.

    For the 2003–04 financial year she has:

    • a taxable income of $86,000
    • surchargeable contributions of $41,000 (of which $33,010 represents the post 20 August 1996 portion of the rolled-over eligible termination payment and $7,990 employer contributions)
    • 4,498 total service days (consisting of 2,560 post 20 August 1996 days).

    As the gross or reduced amount of the employer eligible termination payment ($58,000) Mary received in the 2003–04 financial year is less than the higher income amount of $114,981, only a portion of the eligible termination payment is included in her adjusted taxable income calculation.

    Mary's adjusted taxable income is the total of:

    Taxable income

    $86,000.00

    Plus: Income tax exempt, family trust distribution tax paid

    $0.00

    Plus: Income tax exempt, ultimate beneficiary non-disclosure tax paid

    $0.00

    Plus: Surchargeable contributions excluding post 20 August 1996 ETP rollover amount ($41,000 – $33,010)

    $7,990.00

    Plus: Reportable fringe benefits amount

    $0.00

    Plus: Eligible termination payment calculation 1 (see below)

    $4,706.00

    Less: Assessable amount of all eligible termination payments

    $0.00

    Less: Lump sum payments for unused long service leave

    $0.00

    Adjusted taxable income

    $98,696.00

    As Mary's adjusted taxable income is greater than the lower income amount of $94,691 for the 2003–04 financial year, she has a super surcharge liability.

    1

    Eligible termination payment calculation

     

    = $58,000 x 365

     

    4,498

     

    = $4,706

     

    End of example

    Surcharge rates

    Before the surcharge was abolished for surchargeable contributions made and termination payments received, from 1 July 2005, the maximum surcharge rate was gradually reduced to:

    • 15% for the financial years 1997–2003
    • 14.5% in 2003–04
    • 12.5% in 2004–05.

    The maximum surcharge rate applies to your surchargeable contributions if your adjusted taxable income exceeds the higher income amount.

    There is no surcharge if your adjusted taxable income is equal to or below the lower income amount.

    If your adjusted taxable income is between the lower income amount and higher income amount, the surcharge rate is calculated using the following formula:

    Surcharge rate =

    Adjusted taxable income – lower income amount A

    'A' is different each financial year and is listed in table 1.

    Example – calculating the surcharge rate

    Mary's adjusted taxable income is $98,696.00 for the 2003–04 financial year.

    The surcharge rate is calculated as:

    Rate =

    $98,696 – $94,691
    1,399.31034

    =

    2.86212%

    The surcharge rate that applies to Mary's surchargeable contributions is 2.86212%.

    Mary's surchargeable contributions are $41,000. Her surcharge liability is calculated as:

    Liability =

    $41,000 x 2.86212%

    =

    $1173.45

     

    End of example

    Paying the surcharge payable

    When your surcharge is due and payable depends on what type of fund you are a member of. If you are a member of an:

    • accumulation fund or funded defined benefit fund – your surcharge is due and payable within 30 days of their assessment issuing. This applies to most people, or
    • unfunded defined benefit fund – including constitutionally protected funds (CPF's), your surcharge is not payable until your benefit is paid.

    Accumulation funds and funded defined benefit funds

    The general rule is the super fund holding your surchargeable contributions pays the surcharge liability for those contributions.

    If you transferred your surchargeable contributions from one super fund to another, the fund holding your contributions when we assess them for surcharge is required to pay. This is the case no matter which fund reported the surchargeable contributions to us.

    If the surchargeable contributions are paid to you before we issue an assessment to your super fund, you are liable to pay the surcharge. This is because you currently hold the contributions (for example, if you retired and your benefit was paid to you as a lump sum or pension).

    When we issue an assessment, it must be paid within one month. We may add a general interest charge to late payments.

    See also:

    Unfunded defined benefit funds

    These funds are unable to pay your surcharge assessments when they are made each year – the notional contributions being assessed are not paid by your employer until you leave the fund and are paid a super benefit.

    Your unfunded defined benefit fund will keep a surcharge debt account for you, to record the amount of surcharge assessed for the 1997–2005 financial years.

    Interest will also be added based on the outstanding balance of your surcharge debt account on 30 June each year using the 10-year Treasury bond rate – see 'Other super rates and thresholds' in Key superannuation rates and thresholds.

    The surcharge legislation requires your fund to impose this interest to ensure the value of your accumulated surcharge debt is maintained over time.

    You can make a voluntary payment directly to your fund at any time to reduce the balance of your surcharge debt account and reduce the interest payable at the end of the financial year.

    There are many personal financial factors relevant to your decision to make voluntary payments. Seek professional advice before you make any voluntary payments.

    Your surcharge liability is deferred until a super benefit is paid by your fund. This occurs when either:

    • you receive a lump sum payment, or begin receiving a pension
    • you transfer your contributions
    • a payment is made to your spouse on marriage breakdown
    • a benefit payment is made upon your death.

    Your fund must pay the balance of your surcharge debt account on your behalf within one month of one these events occurring.

    The surcharge liability amount may be deducted from your final benefit payment by your fund.

    Constitutionally protected super fund members

    We will keep a surcharge debt account for you to record the surcharge assessed on the surchargeable contributions reported by your fund for the 1997–2005 financial years.

    Interest will be added to the debt account based on the outstanding balance of your surcharge debt account on 30 June each year using the 10-year Treasury bond rate –see 'Other super rates and thresholds' in Key superannuation rates and thresholds. This interest ensures the value of your accumulated surcharge debt is maintained over time.

    You can make a voluntary payment directly to us at any time to reduce the balance of your surcharge debt account and reduce the interest payable at the end of the financial year.

    There are many personal financial factors relevant to the decision to make voluntary payments. Seek professional advice before you make any voluntary payments.

    Your liability to surcharge is deferred until a super benefit becomes payable to you by your fund. This occurs when:

    • you receive a lump sum payment, or begin receiving a pension
    • you transfer your contributions
    • a payment is made to your spouse on marriage breakdown
    • a benefit payment is made upon your death
    • the super fund ceases to be a constitutionally protected super fund.

    Your super fund advises us when your benefit becomes payable (including when you leave the fund or begin receiving a pension). They do this by lodging a Superannuation member exit statement for constitutionally protected funds (MES) (NAT 3203, PDF, 169KB)This link will download a file.

    After we receive the form, we calculate your final liability and issue you a notice of final liability. You need to pay this amount within three months. We may add a general interest charge to late payments.

    Your final liability is the lesser of the:

    • balance of your surcharge debt account we hold, or
    • employer-financed component amount (a percentage of the employer financed part of the benefit payable to you – or rolled over – that accrued after 20 August 1996 and before 1 July 2005).

    If you begin receiving a pension, you may be able to pay your surcharge liability from your benefits. Ask your fund if you can do this. If you transfer your benefits to another super fund, you can ask the new fund to pay the surcharge on your behalf.

    Exemption for some state judges

    Some state judges are exempt from super surcharge on their constitutionally protected fund memberships.

    If you're a member of a constitutionally protected fund because you were a judge of a state court before 7 December 1997, you are exempt from this surcharge on your constitutionally protected fund membership for the financial years you remained in the same office or employment.

    Surcharge and tax file numbers

    It is important your super fund has your correct tax file number (TFN). We use your TFN to match the details on your tax return with the surchargeable contributions reported annually by your super fund.

    If you have not given your TFN to your fund, we take all reasonable steps to match your tax return with the details of your surchargeable contributions. If we can't match your TFN, we will advise you in writing.

    We will ask you for your TFN. If you don't provide it, we won't know your adjusted taxable income, and may assess surcharge at the maximum rate on your surchargeable contributions – this depends on when you joined your fund or opened your account.

    Before 7 May 1997

    We assess surcharge at the maximum rate if all the following apply:

    • You, your employer or another person on your behalf, began to pay contributions to a particular super fund before 7 May 1997.
    • Your correct TFN was not provided to us.
    • Your surchargeable contributions are higher than the relevant threshold for the financial year.

    Table 2: Surchargeable contributions threshold for each financial year

    Financial year

    Surchargeable contributions threshold

    2005–06

    Surcharge abolished

    2004–05

    $4,273

    2003–04

    $4,058

    2002–03

    $3,880

    2001–02

    $3,248

    2000–01

    $3,105

    1999–2000

    $2,607

    1998–99

    $2,529

    1997–98

    $2,092

     

    Example

    Patrick's employer makes contributions of $4,750 in the 2004–05 financial year to his super fund. Patrick has been a member of the fund since 1994.

    Patrick has not quoted his TFN, and we were unable to match his TFN to determine his adjusted taxable income.

    Patrick's surchargeable contributions of $4,750 exceed the surchargeable contributions threshold for the 2004–05 financial year. The maximum surcharge rate is 12.5%, so an assessment for $593.75 is issued to his super fund.

    End of example

    On or after 7 May 1997

    The maximum rate will be applied to your surchargeable contributions if:

    • you, your employer or another person on your behalf, began to pay contributions to a super fund on or after 7 May 1997
    • we are unable to match your TFN with the reported surchargeable contributions and work out your adjusted taxable income.

    This is regardless of the amount of surchargeable contributions.

    Example

    Julie started work on 3 May 2005 and began receiving employer contributions to her super fund from that date.

    Her employer contributions for the 2004–05 financial year are $260.

    We are unable to match Julie's TFN with the fund's reported contributions so the maximum surcharge rate of 12.5% applies to the $260 of surchargeable contributions.

    Julie's fund receives a surcharge assessment for $32.50.

    End of example

    Amending surcharge assessments

    The process to amend an assessment can be initiated by you, your fund or us. An amendment may be required when either:

    • there is a change to your adjusted taxable income – this may occur if your income tax assessment for that financial year was amended
    • your super fund may change the amount of surchargeable contributions reported to us
    • your TFN is provided after an assessment was issued, because we could not match your TFN with reported information.

    We will send the amended assessment to the holder of your contributions. This may be either:

    • the fund that received the original assessment
    • the new fund you rolled the contributions into
    • yourself, if you retired or were paid the contributions as part of a benefit.

    If an assessment is amended, one of two things may happen – if the holder of the contributions has:

    • paid too much surcharge – depending on the circumstances, we may need to pay interest when we refund the overpaid surcharge
    • not paid enough surcharge – they may need to pay us a general interest charge as well as the additional surcharge.

    If you're the holder of the contributions and receive an assessment, you must declare any interest paid to you in your tax return for the financial year in which the interest is paid. General interest charges are deductible in your tax return for the financial year they are incurred. Surcharge assessments can generally only be amended within four years of the date they issue or from when the surcharge becomes due and payable. There are exceptions that allow assessments to be amended after the general time limit has expired. We will advise you in writing if you, or your fund, have requested an amendment outside the time limit.

    See also:

    Termination payments surcharge

    The termination payments surcharge is levied on certain components of an employer eligible termination payment. It applies if the sum of your taxable income and certain other amounts are over a certain limit in the relevant financial year.

    It was abolished for termination payments paid on or after 1 July 2005.

    An employer eligible termination payment is a lump sum paid to an employee by an employer upon termination of employment. A 'golden handshake' is an example of an employer eligible termination payment.

    Payments of unused annual leave and unused long service leave are not eligible termination payments.

    The surchargeable amount of an employer eligible termination payment is the amount that relates to your post 20 August 1996 service period and is taken in cash, not rolled over to a super fund, retirement savings account or other super provider.

    The termination payments surcharge does not apply to:

    • a post June 1994 invalidity component of the termination payment
    • a CGT exempt component of the termination payment
    • an eligible termination payment from an employee share acquisition scheme.

    Employer eligible termination payments taken in cash are not surchargeable contributions.

    If your adjusted taxable income exceeds the lower income amount for the relevant financial year, the termination payments surcharge will apply to the post 20 August 1996 portion of the employer eligible termination payment taken in cash.

    The surcharge rate that applies to the termination payment is determined by the amount of your adjusted taxable income.

    The amount of the termination payment subject to the surcharge depends on whether the termination payment was made before or after the legal time in the Australian Capital Territory of 7.30pm on 22 May 2001.

    Formula for termination payments made at or before 7.30pm on 22 May 2001:

    Surchargeable amount of eligible termination payment

    =

    Post 20 August 1996 period x Termination payment
    ________________________________________
     
    Total period

    Formula for termination payments made after 7.30pm on 22 May 2001:

    Surchargeable amount of eligible termination payment

    =

    Post 20 Aug 1996 period x (Termination payment-Excessive component)
    __________________________________________
     
    Total period

    Legislative changes exclude the excessive component from being subject to the termination payments surcharge for payments made after 7.30pm by legal time in the Australian Capital Territory, on 22 May 2001.

    See also:

    If you think an assessment is wrong

    If you believe an assessment is incorrect because you fund reported your surchargeable contributions incorrectly, ask your fund to correct the error.

    If you think a:

    • superannuation contributions surcharge assessment is incorrect – you, or your fund, may object to the assessment within 60 days of receiving the notice
    • termination payments surcharge assessment is incorrect – you may object to the assessment within 60 days of receiving the notice.

    For your objection to be valid, it must:

    • be in writing – send us a letter or use the standard objection form
    • be lodged within 60 days of receiving an assessment, unless you requested an extension of time
    • state fully and in detail the reason you think the decision is incorrect
    • contain a declaration that information in the objection and supporting documents is true and correct
    • be signed and dated.

    See also:

    Deceased estates

    Surcharge is not payable on contributions paid or employment termination payments received in the financial year in which you die.

    If you die, and the surcharge assessed for the financial years before the financial year of your death was not paid before the super death benefit was paid, the beneficiary or your deceased estate needs to pay the surcharge.

    More information

    For more information on the superannuation contributions surcharge and the termination payments surcharge, you can:

    • talk to a super or tax professional
    • phone our information line on 13 10 20 between 8.00am and 6.00pm, Monday to Friday
    • write to

      Australian Taxation Office
      PO Box 277
      WORLD TRADE CENTRE  VIC  8005

    The information in this document is for individuals. It explains how super contributions and termination payments surcharges are calculated and how they apply.

      Last modified: 01 Sep 2016QC 18956