WEEK 5 SUPERANNUATION TUTORIAL QUESTIONS ANSWER GUIDE STUDENTS-1-1

.pdf

School

Royal Melbourne Institute of Technology *

*We aren’t endorsed by this school

Course

2466

Subject

Accounting

Date

Jan 9, 2024

Type

pdf

Pages

Uploaded by ColonelFreedom7701

1 Answers to Questions Question 1 Barbara is aged 53 and under the Superannuation Guarantee Charge her employer pays $20,000 to her superannuation fund. In addition she has entered into an effective salary sacrifice arrangement with her employer to sacrifice 20% of her salary into superannuation. This results in an additional contribution of $45,000 for the year. Barbara's marginal tax rate is 47c/$ (including Medicare levy). Determine the total tax levied on the contributions to Barbara's superannuation fund and the tax effect on Barbara's employer. Answer Barbara’s total concessional contributions include both $20,000 and $45,000, totaling $65,000. The employer will receive a tax deduction for these payments (s 290-60 of ITAA97). The superannuation fund will pay tax on them at the rate of 15%, meaning they will pay $9,750 in tax. As Barbara is 53, from 1 July 2017 her concessional contributions cap is $25,000 per year (s 291-20 of ITAA97). This means she has exceeded her cap by $40,000. Barbara will pay income tax so that in effect the total amount of tax paid on the excess of $40,000 will be equivalent to her marginal tax rate of 47c/$. Question 2 William is aged 56 and is self-employed. He is in good health and he has asked you for advice on whether he should take his superannuation as a lump sum at the end of the current tax year or whether he should wait unit he is 60. Assume that the fund is a taxed fund. Over the years William has contributed to a superannuation fund for self-employed business people, and the most recent statement from his taxed superannuation fund states the following entitlements:  Concessional contributions $420,000  Non-concessional contributions $250,000  Previous growth (interest and capital gain) $180,000 Before the end of the current year William plans to contribute another $10,000 and the superannuation fund has reported an income of $20,000 before tax. Required: Advise William on the following: i) The effect of his contribution on his personal tax. ii) The tax if any to be paid by the superannuation fund on the income on William's investments. iii) The tax impact of taking the total value of the superannuation benefits at the

2 end of the current tax year. iv) The tax impact of taking the total value of the superannuation benefits after he turns 60. Answer i) The $10,000 can be a concessional contribution (s 292-25 and s 295-190 of ITAA97), provided he nominates the contribution to be a concessional contribution. The contribution would be tax deductible to him personally and taxable in the hands of the superannuation fund at the rate of 15%. ii) The income of the fund will be taxed in the hands of the fund at the rate of 15%. However, capital gains on assets held for at least a year will be taxed at the rate of 10%. iii) If all goes to plan, and William contributes another $10,000 (concessional contributions) then the fund will pay 15% tax on this and so have an extra $8,500. The fund’s earnings of $20,000 will be taxed at 15% and so the fund will have an extra $17,000. Consequently, the balance would be as follows:  Concessional contributions $428,500 (being $420,000 + $8,500)  Non-concessional contributions $250,000  Previous growth (interest and capital gain) $197,000 (being $180,000 + $17,000) The $250,000 originating from non-concessional contributions would be considered part of the tax free component and so would not be taxable in William’s hands. The rest (the $428,500 concessional contributions and $197,000 accumulated earnings) would constitute the taxable component. As he is under 60, the first $200,000 would not be subject to tax, and the rest ($425,500) would be capped at 17% (including Medicare Levy). iv) If William is at least 60, then the full amount would be tax-free. Question 3 Jenny receives a superannuation lump sum of $500,000 at age 60. Her superannuation lump sum includes a tax free component of $300,000, and a taxable component in the fund of $200,000. Assume that the fund is a taxed fund. What tax if any is Jenny liable for? Answer As Jenny is at least 60 years old, the full lump sum will be tax-free assuming her superannuation fund is a taxed fund. Question 4 Jack retired and is 58 years of age when he receives a superannuation lump sum of $580,000 which comprised of a tax free component of $100,000 and the remainder

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Recommended textbooks for you

SWFT Individual Income Taxes

Accounting

ISBN:9780357391365

Author:YOUNG

Publisher:Cengage

Individual Income Taxes

Accounting

ISBN:9780357109731

Author:Hoffman

Publisher:CENGAGE LEARNING - CONSIGNMENT

CONCEPTS IN FED.TAX., 2020-W/ACCESS

Accounting

ISBN:9780357110362

Author:Murphy

Publisher:CENGAGE L

SWFT Comprehensive Volume 2019

Accounting

ISBN:9780357233306

Author:Maloney

Publisher:Cengage

SWFT Comprehensive Vol 2020

Accounting

ISBN:9780357391723

Author:Maloney

Publisher:Cengage

Pfin (with Mindtap, 1 Term Printed Access Card) (...

Finance

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

SWFT Individual Income Taxes
Accounting
ISBN:9780357391365
Author:YOUNG
Publisher:Cengage
Individual Income Taxes
Accounting
ISBN:9780357109731
Author:Hoffman
Publisher:CENGAGE LEARNING - CONSIGNMENT
CONCEPTS IN FED.TAX., 2020-W/ACCESS
Accounting
ISBN:9780357110362
Author:Murphy
Publisher:CENGAGE L
SWFT Comprehensive Volume 2019
Accounting
ISBN:9780357233306
Author:Maloney
Publisher:Cengage
SWFT Comprehensive Vol 2020
Accounting
ISBN:9780357391723
Author:Maloney
Publisher:Cengage
Pfin (with Mindtap, 1 Term Printed Access Card) (...
Finance
ISBN:9780357033609
Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk
Publisher:Cengage Learning