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  • Case study

    The following case study outlines the income tax and excess contributions tax consequences of a transfer from a foreign super fund, depending on the amount of applicable fund earnings the member elects to include in the fund's assessable income.

    Marianne, 62, transferred $420,000 from her foreign super fund to her complying Australian super fund in 2008–09, several years after she became resident in Australia. She had given her TFN to her fund when she opened her account. Her fund-capped contribution limit is $450,000. As she is 62 years old, her fund does not have to confirm that she meets the work test before accepting the contribution.

    The transfer consisted of:

    • $400,000 which was vested in her at the time of the transfer, of which $50,000 was applicable fund earnings
    • $20,000 which her foreign employer added to her account balance at the time of the transfer as a discretionary payment.

    There are three options available to Marianne.

    Option 1

    Marianne decides not to include any of the applicable fund earnings in her super fund’s assessable income.

    Her fund reports:

    • $400,000 at the Non-assessable foreign fund amount label
    • $20,000 at the Assessable foreign fund amount label
    • $420,000 at the Total contributions label.

    Income tax

    Marianne must include $50,000 applicable fund earnings in her personal assessable income for the year and pay tax on the amount at her marginal tax rates.

    The fund must include $20,000 in its assessable income for the year and pay tax on the amount at 15%.

    Excess contributions tax

    $400,000 is counted towards Marianne’s non-concessional contributions.

    $20,000 is counted towards Marianne’s concessional contributions.

    Option 2

    Marianne decides to include all of the applicable fund earnings in her super fund’s assessable income.

    Her fund reports:

    • $350,000 at the Non-assessable foreign fund amount label
    • $20,000 at the Assessable foreign fund amount label
    • $420,000 at the Total contributions label.

    Income tax

    Marianne does not include any amount of the transfer in her personal assessable income for the year, as she had elected for the full amount of her applicable fund earnings to be included in the fund's assessable income.

    The fund must include $70,000 ($20,000 + $50,000) in its assessable income for the year and pay tax on the amount at 15%.

    Excess contributions tax

    $350,000 is counted towards Marianne’s non-concessional contributions.

    $20,000 is counted towards Marianne’s concessional contributions.

    The $50,000 does not count towards either her concessional or non-concessional contributions.

    Option 3

    Marianne decides to include part of the applicable fund earnings in her super fund’s assessable income. She elects to include an amount of $30,000.

    Her fund reports:

    • $370,000 at the Non-assessable foreign fund amount label
    • $20,000 at the Assessable foreign fund amount label
    • $420,000 at the Total contributions label.

    Income tax

    Marianne must include $20,000 (her applicable fund earnings of $50,000 less the $30,000 she has elected to include in the fund's assessable income) in her personal assessable income for the year and pay tax on the amount at her marginal tax rates.

    The fund must include $50,000 ($20,000 + $30,000) in its assessable income for the year and pay tax on the amount at 15%.

    Excess contributions tax

    $350,000 is counted towards Marianne’s non-concessional contributions.

    $20,000 is counted towards Marianne’s concessional contributions.

    The $30,000 does not count towards either her concessional or non-concessional contributions.

    See also:

      Last modified: 01 Jun 2018QC 21943