• Adjusted taxable income

    Two methods are used to calculate a member's adjusted taxable income:

    • First case method
    • Second case method

    Follow these steps to choose the correct method to calculate a member's adjusted taxable income:

    Did the member receive an eligible termination payment from their employer?

    On this page:

    Reduced amount of an eligible 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

    With the first case method, adjusted taxable income is calculated as being a member's taxable income:

    • minus super fund and rollover fund eligible termination payments
    • minus lump sum payments for unused long service leave (for post- 15 August 1978 service) and unused annual leave received when they ceased employment because of bona fide redundancy, invalidity or under an approved early retirement scheme
    • plus family trust distributions exempt from income tax because the trust paid the tax
    • plus distributions exempt from income tax because ultimate beneficiary non-disclosure tax was paid
    • plus their total surchargeable contributions
    • plus reportable fringe benefit amount shown on their payment summary (for income years ended 30 June 2000 onwards).

    Example: 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; this has a reportable fringe benefit of $8,000.

    Table 2: Jamal's adjusted taxable income

    Item

    Amount

    Taxable income

    $72,000

    Less: Super fund eligible termination payments

    $0

    Less: Applicable unused annual and long service leave payments

    $0

    Plus: Family trust distribution amounts

    $0

    Plus: Ultimate beneficiary non-disclosure tax

    $0

    Plus: Surchargeable contributions

    $6,500

    Plus: Reportable fringe benefit amount

    $8,000

    Adjusted taxable income

    $86,500

    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

    With the second case method, adjusted taxable income is calculated as being a member's taxable income:

    • plus family trust distributions exempt from income tax because the trust paid the tax
    • plus distributions exempt from income tax because ultimate beneficiary non-disclosure tax was paid
    • plus their total surchargeable contributions (excluding any post 20 August 1996 portion of an eligible termination payment that was rolled over)
    • plus any reportable fringe benefit amount shown on their payment summary (for income years ended 30 June 2000 onwards)
    • plus the amount we arrive at by doing the eligible termination payment calculation (see the formula to calculate this below)
    • minus the assessable amount of all eligible termination payments
    • minus lump sum payments for unused long service leave (for post-15 August 1978 service) and unused annual leave received when they ceased employment because of bona fide redundancy, invalidity or under an approved early retirement scheme.

    The eligible termination payment amount

    Use this formula to work out a member's eligible termination payment amount:

    • Taxable portion of each eligible termination payment × number of
      service days after 20 August 1996 (see note 1) ÷ total number of eligible service days

    Note 1: 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 accrual of eligible termination payments is included when we work out adjusted taxable income.

    Example: 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 Mary 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 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.

    Table 3: Mary's adjusted taxable income

    Item

    Amount

    Taxable income

    $86,000

    Plus: Income tax exempt, family trust distribution tax paid

    $0

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

    $0

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

    $7,990

    Plus: Reportable fringe benefits amount

    $0

    Plus: Eligible termination payment calculation 1 (see below)

    $4,706

    Less: Assessable amount of all eligible termination payments

    $0

    Less: Lump sum payments for unused long service leave

    $0

    Adjusted taxable income

    $98,696

    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.

    Mary's eligible termination payment calculation is:

    $58,000 × 365 ÷ 4,498 = $4,706

    End of example
      Last modified: 30 Aug 2017QC 18957