# What are they doing to super?



## sptrawler (4 July 2012)

If you put your money into super, you pay 15% contribution tax, the earnings pay 15% tax.
So does that mean if you had $400,000 in super and it earns 5% that is $20,000. Then you pay $3,000 tax, plus have to prepay payg tax for next year.
If the money was in the bank and was your only income you would have to pay 19% on the $1800 above the $18,200 which would indicate you would pay $320. That would leave you with $19680.
I guess what I am asking is if you are a low to middle income earner why would you put money in super? If you and your wife, for example, can earn nearly $40,000 tax free outside of super?


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## ROE (4 July 2012)

sptrawler said:


> If you put your money into super, you pay 15% contribution tax, the earnings pay 15% tax.
> So does that mean if you had $400,000 in super and it earns 5% that is $20,000. Then you pay $3,000 tax, plus have to prepay payg tax for next year.
> If the money was in the bank and was your only income you would have to pay 19% on the $1800 above the $18,200 which would indicate you would pay $320. That would leave you with $19680.
> I guess what I am asking is if you are a low to middle income earner why would you put money in super? If you and your wife, for example, can earn nearly $40,000 tax free outside of super?




$400,000 you have outside super, you already paid tax via PAYG or whatever
Super deposit in your account tax free then get tax at 15% contribution

Super tax free both income and capital gain when you reach your retirement age

The number already been worked out, super beats it hand down...


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## sptrawler (4 July 2012)

ROE said:


> $400,000 you have outside super, you already paid tax via PAYG or whatever
> Super deposit in your account tax free then get tax at 15% contribution
> 
> Super tax free both income and capital gain when you reach your retirement age
> ...




O.K what about if you are 55, sell an investment and make $400,000 clear profit. Do you put it in super or keep it out if you are unemployed?
I guess what I am getting at is super is good because you can get a reasonable income, tax free in retirement. The more the tax free threshold is lifted the less attractive super becomes. Mainly because it ties up your money in a government manipulated scheme.


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## sptrawler (4 July 2012)

There is a piece missing in the jigsaw. IMO


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## Junior (4 July 2012)

If you have no other income, you are correct, keeping your money outside of super may result in less tax.  

However, consider the following:

- If you make a 'non-concessional' (after tax) contribution, then there is no contributions tax.  Contributions tax of 15% only applies to your mandated employer contributions (i.e. 9% of salary) and before tax contributions (ie. salary sacrifice).  This tax is to account for the fact that you have avoided paying income tax on that money, as you've directed in straight into superannuation rather than reporting it as taxable income.

- When you reach preservation age (currently 55 y.o.) you can commence a pension from the fund, once you do this earnings tax falls to 0% in the Fund and CGT falls to 0%.

In some situations there is less tax paid by keeping your money outside of super, however in many situations there can be significant tax savings by moving assets into super.


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## sptrawler (4 July 2012)

Junior said:


> If you have no other income, you are correct, keeping your money outside of super may result in less tax.
> 
> However, consider the following:
> 
> ...



That's all very true Junior, however what about a couple who get to 57 and decide to sell their investments. These end up with an after tax profit of $800,000, they can both make an after tax contribution of $400,000 into super( with the 3 yr bring forward). But why would they bother, as they could leave the money more flexible outside super.
I am just trying to work out how this all fits in with the 12% s.g, there has to be a connection.IMO


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## Junior (5 July 2012)

sptrawler said:


> That's all very true Junior, however what about a couple who get to 57 and decide to sell their investments. These end up with an after tax profit of $800,000, they can both make an after tax contribution of $400,000 into super( with the 3 yr bring forward). But why would they bother, as they could leave the money more flexible outside super.
> I am just trying to work out how this all fits in with the 12% s.g, there has to be a connection.IMO




Well...if they made a profit in the order of $1 million+ as you're suggesting they would have paid a huge amount of tax via Capital Gains Tax.  If those investments were held in super in the first place those could have started a pension and reduced CGT to NIL.

Basically, for anyone with a reasonable accumulation of assets and a decent salary, moving assets into super WILL reduce total tax payable.  It's simply a matter of sitting down and applying various strategies to your scenario to work out the best way to move assets in and out of super.


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## burglar (5 July 2012)

sptrawler said:


> ... if you are unemployed? ...




I believe that you are not allowed to put into super if you are unemployed.


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## Julia (5 July 2012)

burglar said:


> I believe that you are not allowed to put into super if you are unemployed.




Interesting point.  Given Centrelink require people to use up their savings before receiving the dole, the logical recourse would be to put any saved funds into Super, thus bypassing that.

Is there anything saying people cannot do this, Junior?


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## sptrawler (5 July 2012)

Julia said:


> Interesting point.  Given Centrelink require people to use up their savings before receiving the dole, the logical recourse would be to put any saved funds into Super, thus bypassing that.
> 
> Is there anything saying people cannot do this, Junior?




Any money you have in super is taken into consideration for the age pension, however I don't think it has any effect on welfare before retirement age. I am not certain but this is the sort of issue that the thread should bring out.
Thanks Julia


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## sptrawler (5 July 2012)

burglar said:


> I believe that you are not allowed to put into super if you are unemployed.




You have to differentiate between unemployed and self employed.


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## burglar (6 July 2012)

sptrawler said:


> You have to differentiate between unemployed and self employed.




Ok. I thought I had worded it carefully??!

I believe that I am not allowed to contribute to Super if I am receiving Newstart benefit!


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## sptrawler (6 July 2012)

burglar said:


> Ok. I thought I had worded it carefully??!
> 
> I believe that I am not allowed to contribute to Super if I am receiving Newstart benefit!





That is an interesting one, I had never thought about it. 
I suppose you are meant to have no money before you get newstart alloawance and the allowance is for essentials, not for a savings plan.
Following on with the though, what would happen if you made a volantary contribution prior to loosing your job. Would that preclude you from recieving newstart?


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## sptrawler (6 July 2012)

Now the lowest tax rate is 19%, is the 15% tax offset for S.F.R being changed?


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## Julia (6 July 2012)

sptrawler said:


> Any money you have in super is taken into consideration for the age pension, however I don't think it has any effect on welfare before retirement age. I am not certain but this is the sort of issue that the thread should bring out.



Super is definitely quarantined from Centrelink's assessment prior to reaching age pension age.
What I'm less sure about is whether someone with savings outside Super - on becoming unemployed - could with immunity place those funds into Super just for the purpose of qualifying for Newstart which is means tested.
A phone call to Centrelink would clear this up.   My guess would be that you could do it, but I'm not sure.




sptrawler said:


> That is an interesting one, I had never thought about it.
> I suppose you are meant to have no money before you get newstart alloawance and the allowance is for essentials, not for a savings plan.
> Following on with the though, what would happen if you made a volantary contribution prior to loosing your job. Would that preclude you from recieving newstart?



Again, something to ask Centrelink.  It would have to fall within the limits for contributions I suppose, but apart from that it's hard to imagine why you wouldn't be able to do it.



sptrawler said:


> Now the lowest tax rate is 19%, is the 15% tax offset for S.F.R being changed?




What is S.F.R.?  Self funded retiree?  If so, that person, in retirement, shouldn't be paying any tax if they have their assets in Super and are drawing an allocated pension.


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## sptrawler (6 July 2012)

Julia said:


> What is S.F.R.?  Self funded retiree?  If so, that person, in retirement, shouldn't be paying any tax if they have their assets in Super and are drawing an allocated pension.




I am thinking of a self funded retiree between 55 - 60. 
After 60 the fund becomes completely tax free.
Between 55 and 60 if the fund is in the pension phase, its earnings are tax free however the pension is taxable depending on the type of contribution allocation i.e concessional or non concessional.
However there was a 15% tax offset that meant the first $37k or so was tax freee, I was wondering if this has been adjusted in line with the new tax scales.
Thanks for your responses. 
The super rules are pretty convoluted having a thread where people can bounce some questions and scenarios around, I think will be helpfull. 
Even if we don't know the answers it is interesting to get other peoples take on issues.


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## Happy (6 July 2012)

Numbers keep changing, not sure if it is current, but depending on age you can top up super with lump sum of $25,000 or $50,000

Also you can deposit 3 years worth in one go, every 3 years.


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## sptrawler (6 July 2012)

Happy said:


> Numbers keep changing, not sure if it is current, but depending on age you can top up super with lump sum of $25,000 or $50,000
> 
> Also you can deposit 3 years worth in one go, every 3 years.




From my understanding, what you can salary sacrifice is $25k, over 50's could sacrifice $50k but the gov has reduced it to $25k( I think they want you to work longer).

The 3 years worth in one go, from my understanding is regarding the non concessional contribution( after tax, out of your pocket).
You can make a non concessional contribution(out of your pocket) of $150k a year, or a one of $450k contribution by bringing forward the next 3 years allowance. 
This from my understanding can only be done before you turn 65, after 65 you have to pass the 'work test'.


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## Julia (6 July 2012)

sptrawler, I'm not sure whether you are actually seeking the answers to the questions you're putting up, or having a hypothetical chat.

If you actually want the answers, I'd suggest making an appt to see one of Centrelink's Financial Information Service Officers.  They are just terrific.  Completely free of charge and you do not have to be receiving any Centrelink benefit to see them.  They give you all the facts, minus the spin which can accompany advice from external financial advisers.


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## sptrawler (6 July 2012)

Julia said:


> sptrawler, I'm not sure whether you are actually seeking the answers to the questions you're putting up, or having a hypothetical chat.
> 
> If you actually want the answers, I'd suggest making an appt to see one of Centrelink's Financial Information Service Officers.  They are just terrific.  Completely free of charge and you do not have to be receiving any Centrelink benefit to see them.  They give you all the facts, minus the spin which can accompany advice from external financial advisers.




Yes Julia I am having a hypothetical chat. I am meeting a lot of people who are fast approaching retirement, who have a lot of questions that they are too embarressed to ask. I thought maybe a thread where questions regarding super could be aired, may be worth while. I guess I was wrong.


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## burglar (6 July 2012)

sptrawler said:


> ... I guess I was wrong.




Why would you guess that?!


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## sptrawler (6 July 2012)

burglar said:


> Why would you guess that?!




Well not many posters are putting forward questions or hypotheticals. 
I thought it would be a popular topic of discussion, many of the members are self funded retirees and pensioners. There are also members aware of the importance of the knowledge that can be gained from people who have walked the path.
However I may have overestimated the interest.LOL Best we keep the discussion topical.


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## Julia (7 July 2012)

sptrawler said:


> Yes Julia I am having a hypothetical chat. I am meeting a lot of people who are fast approaching retirement, who have a lot of questions that they are too embarressed to ask. I thought maybe a thread where questions regarding super could be aired, may be worth while. I guess I was wrong.



Why on earth would anyone be too embarrassed to ask a question about Super?  That's why Centrelink have call centres.



sptrawler said:


> Well not many posters are putting forward questions or hypotheticals.
> I thought it would be a popular topic of discussion, many of the members are self funded retirees and pensioners. There are also members aware of the importance of the knowledge that can be gained from people who have walked the path.
> However I may have overestimated the interest.LOL Best we keep the discussion topical.



You may have overestimated the number of self funded retirees on this forum.  Or at least those who are prepared to contribute.


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## Happy (9 July 2012)

There is requirement to remove certain minimum percentage of super depending on age.

Quite strange requirement if we are living longer and would be nice if some money lasted to our final days.


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## Junior (9 July 2012)

Happy said:


> There is requirement to remove certain minimum percentage of super depending on age.
> 
> Quite strange requirement if we are living longer and would be nice if some money lasted to our final days.




Once you decide to commence a pension from your benefits, you must withdraw a minimum percentage of the account each year.  However you are never forced to start a pension, and you can have two super accounts, one in pension phase and one in accumulation.  Additionally, just because you draw the funds out as a pension, doesn't mean you must spend them.

With regards to *Centrelink*, as Julia said, call them to check.  My understanding is that the answer is Yes, you could contribute to Super and then access a higher benefit via Newstart as Super is not assessed by Centrelink until you reach Age Pension Age, or are drawing a Transition to Retirement Pension (between age 55-65).  Depending on your situation this probably is not worth pursuing, because once the funds are in Super they stay there until you qualify to draw a pension.  If you're unemployed it generally would not be wise to lock your savings away in Super, as you may require them to meet living expenses until you find a new job!

*Non Concessional (after tax) contributions*.  Anyone under the age of 65 can contribute up to $150,000 per annum or use the 'bring forward' rule to contribute three years worth at once ($450,000).  Your employment situation is not relevant for this type of contribution.  After turning 65 you must meet the work test to qualify (work 40 hours over any 30 day period for the year).  Do not exceed this cap as the penalties are harsh.

*Concessional Contributions.*  The cap is $25,000 per annum (was higher for over 50s in 2011/12, not anymore).  This cap includes Super Guarantee (i.e. 9% employer contributions) and Salary Sacrifice.  You must be working to make these contributions.


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## Judd (9 July 2012)

Junior said:


> ....*Concessional Contributions.*  The cap is $25,000 per annum (was higher for over 50s in 2011/12, not anymore).  This cap includes Super Guarantee (i.e. 9% employer contributions) and Salary Sacrifice.  You must be working to make these contributions....




Slight correction in that if you’re self-employed, or even not employed, or you only receive a small proportion of your income from an employer (the 10% rule), then you can make concessional contributions that you claim as a tax deduction in your individual tax return.


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## onthesword (10 July 2012)

Concessional Contributions. The cap is $25,000 per annum (was higher for over 50s in 2011/12, not anymore). This cap includes Super Guarantee (i.e. 9% employer contributions) and Salary Sacrifice. You must be working to make these contributions.

To be clear about this, I don't think it is the case if you are in a govt non taxed scheme, in this case I don't think there are any limits ?


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## Junior (10 July 2012)

onthesword said:


> Concessional Contributions. The cap is $25,000 per annum (was higher for over 50s in 2011/12, not anymore). This cap includes Super Guarantee (i.e. 9% employer contributions) and Salary Sacrifice. You must be working to make these contributions.
> 
> To be clear about this, I don't think it is the case if you are in a govt non taxed scheme, in this case I don't think there are any limits ?




Hmmm, I haven't heard anything about that...here's a reference for Concessional Contribution Caps. Click


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## Judd (10 July 2012)

onthesword said:


> Concessional Contributions. The cap is $25,000 per annum (was higher for over 50s in 2011/12, not anymore). This cap includes Super Guarantee (i.e. 9% employer contributions) and Salary Sacrifice. You must be working to make these contributions.
> 
> To be clear about this, I don't think it is the case if you are in a govt non taxed scheme, in this case I don't think there are any limits ?




From memory.  Under the previous (now closed) Federal Government Schemes (CSS & PSS) you could not contribute to those schemes via salary sacrifice.  Had to use a separate fund.  The notional top up to 9% was not counted - I think.

For the current scheme (PSSap) refer to this link

http://www.pssap.gov.au/your-scheme/contributions/#Concessional

Yes the Feds put in 15.4% as opposed to 9% for the rest of the population.  This was due to the actuarial arrangements applicable to the CSS/PSS where the employing agency had to make allowance for the amount to be contributed to provide from the end benefit.  When the CSS was closed in 1990, the notional amount was 25% of salary and the PSS about 10%.  As the mix changed over time it became 16.5% combined and when the PSS closed, the unions accepted the 15.4%.  I was well out of all that crap by that stage.


All the above is from a hazy memory.  State Government schemes were/are a mish mash and fortunately I did not have to know the ins and outs of them.


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## onthesword (11 July 2012)

Well I looked everywhere on the ATO site for information regarding the concessional limits for UNTAXED funds, could not find an answer.
Contacted my untaxed fund and was informed that there are NO concessional limits on untaxed funds at the moment (this fin year) , so will just keep pumping it in .


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## Judd (11 July 2012)

onthesword said:


> Well I looked everywhere on the ATO site for information regarding the concessional limits for UNTAXED funds, could not find an answer.
> Contacted my untaxed fund and was informed that there are NO concessional limits on untaxed funds at the moment (this fin year) , so will just keep pumping it in .




Are you sure you are not referring to Non-concessional contributions, ie those contributions for which you are not claiming a tax deduction?  If so, take care because there are most assuredly limits on these contributions.

http://www.ato.gov.au/super/content.aspx?menuid=0&doc=/content/60489.htm&page=4&H4


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## onthesword (11 July 2012)

No I am referring to pre-tax salary sacrifice (concessional ) contributions. There have never been any to date on UNTAXED super funds, the link you provided shows TAXED super fund limits. It's just one of those quirks as I'm pretty sure all UNTAXED funds are govt funds.


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## onthesword (11 July 2012)

This article may shed some light on it

http://www.theaustralian.com.au/bus...per-cap-loophole/story-e6frgac6-1225832331094


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## Judd (11 July 2012)

onthesword said:


> No I am referring to pre-tax salary sacrifice (concessional ) contributions. There have never been any to date on UNTAXED super funds, the link you provided shows TAXED super fund limits. It's just one of those quirks as I'm pretty sure all UNTAXED funds are govt funds.




Now I understand!  Thanks.  

For the information of others, amounts in these funds are generally only taxed when the benefits are taken out.  They are usually defined benefit funds (Constitutionally protected funds) and "concessional" (salary sacrifice) contributions to them, if allowed, are not counted towards the concessional contributions cap.  Think of Judges super and those of some pollies.  However, non-concessional contributions are counted in that cap I believe.

.


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## sptrawler (14 July 2012)

sptrawler said:


> Now the lowest tax rate is 19%, is the 15% tax offset for S.F.R being changed?




Looks like self funded retirees below 60 are worse off. 


Taxable benefits received as a pension for someone under 60 are taxed at the applicable marginal tax rate but receive a 15 per cent tax offset. Up until June 30, 2012 this meant most people under 60 receiving taxable super pension benefits paid no income tax where their taxable income did not exceed $37,000. On taxable income of between $37,000 and $80,000, tax was effectively paid at 15 per cent.

With new tax rates applying from July 1, 2012, someone under 60 receiving taxable super pension payments can pay tax, after taking account of the 15 per cent tax offset, of 4 per cent up to a total taxable income of $37,000, and 17.5 per cent on taxable income of between $37,000 and $80,000.



Read more: http://www.theage.com.au/money/supe...er-benefits-20120712-21ytw.html#ixzz20fCyTvd1


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## jukesh (16 July 2012)

sptrawler said:


> You have to differentiate between unemployed and self employed.





unemployed - no job

self employed - doing their own business


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## sptrawler (3 August 2012)

I wonder if this push by the super industry has been brought about by the fact they don't have the funds to pay out their obligations. A bit like a ponzi scheme, works o.k while there are more people putting in than taking out.

http://www.theage.com.au/business/p...it-longer-to-access-super-20120802-23icd.html

Is there any wonder that self managed super funds are becomming more popular. Who would trust the super industry to look after your money.


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## Julia (3 August 2012)

From the above link:


> John Brogden, the chief executive of the Financial Services Council, says the age at which people can begin drawing on their super - the ''super preservation age'' - should be moved much closer to the pension eligibility age. The pension eligibility age is 65 at present, but will be progressively lifted to 67 over the next decade.



Might be good to remember, Mr Brogden, that Super is the individual's own money.
Different from accessing taxpayer funds with age pension eligibility.

Agree, sptrawler, that Brogden & co. are primarily motivated by what's best for themselves.


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## Junior (3 August 2012)

Preservation age is being moved Mr Brogden!




> "*Preservation age*
> 
> Generally, you must reach preservation age before you can access your super. Use the following table to work out your preservation age.
> 
> ...


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## sptrawler (3 August 2012)

Junior said:


> Preservation age is being moved Mr Brogden!




Spot on junior, I don't think it has anything to do with the preservation age. More to do with the fact some funds are going to be found wanting very soon.


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## sptrawler (10 March 2014)

A super question for learned members.

If a pension is commenced at 57 years old, and the 4% minimum drawdown is $50,000, from a SMSF.

The fund balances dictate the $50,000 is made up of $20,000 taxfree and $30,000 from taxable components. 

Therefore the taxable component requires payg witholding tax, for arguements sake, let's say that is $2,000.

When the fund pays the pension does it.

A) Pay the member $50,000 and hold a further $2,000 for the tax obligation.

B) Pay the member $48,000 and hold back $2,000 for tax obligations.

C) Pay the member $50,000 and the member pay the $2,000 tax obligation.

I know the easiest thing is ring the tax dept, however after sitting on the phone for 2hrs, I spat the dummy and hung up.


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## Ves (10 March 2014)

sptrawler said:


> A super question for learned members.
> 
> If a pension is commenced at 57 years old, and the 4% minimum drawdown is $50,000, from a SMSF.
> 
> ...



PAYG Withholding tax is worked out on the total pension payment   (so it's total pension - tax = cash payment).

So assuming that the member wanted to the total pension to equal the exact minimum pension of $50,000 (and with the assumption that all of the PAYG tax calculations are correct) then the Fund would pay $48,000 into the member's bank account and pay $2,000 to the ATO on the next quarterly Instalment Activity Statement.  To clarify the Fund pays the PAYG Withholding Tax not the member.


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## sptrawler (10 March 2014)

Ves said:


> PAYG Withholding tax is worked out on the total pension payment   (so it's total pension - tax = cash payment).
> 
> So assuming that the member wanted to the total pension to equal the exact minimum pension of $50,000 (and with the assumption that all of the PAYG tax calculations are correct) then the Fund would pay $48,000 into the member's bank account and pay $2,000 to the ATO on the next quarterly Instalment Activity Statement.  To clarify the Fund pays the PAYG Withholding Tax not the member.




Thanks Ves, that's what I thought. 
I find super an interesting subject, when I come up with a thought I try and work out the scenario.
The more I look into super, the more I realise it is an amazingly well thought out process, considering it is in its infancy.

As per usual, no one should take this as advice, just a chat on a forum. 
I would ring the ATO before making definitive decissions.


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