Deck 10: Superannuation

Question 1

An underfunded defined benefit superannuation scheme is most likely to present adverse financial outcomes for which of the following parties?

A) The employer.
B) The superannuation fund member.
C) The fund actuary.
D) None of the above.

Answer 1

A

Question 2

In the 2015 financial year James has recently turned 53 years of age. He works part-time for a large corporation earning $20,000 p.a. including his employer's contribution under the superannuation guarantee scheme and salary sacrifices 100% of his salary into superannuation. James has just sold an investment property and has an assessable capital gain of $250,000 in the 2015 financial year. What is the maximum tax deduction he can claim for personal superannuation contributions in the current year?

A) $35,000
B) $25,000
C) $15,000
D) $150,000

Answer 2

C

Question 3

Australia's system of superannuation is based on how many pillars?

A) 3
B) 4
C) 7
D) none of the above

Answer 3

A

Question 4

Pursuant to the superannuation choice of fund rules:

A) the employer will nominate a default fund on the standard choice form provided to the employee.
B) the employer will not nominate a default fund on the standard choice form provided to the employee.
C) the employee can change their nominated fund at least once every 12 months.
D) both a and c

Question 5

The tax rate withheld by the recipient superannuation fund on non-concessional contributions within the relevant cap is:

A) 15%.
B) 30%.
C) 0%.
D) none of the above.

Question 6

A superannuation fund with all members in accumulation mode receiving its taxable earnings in the current year of income in the form of interest on investments and fully franked dividends at the company tax rate of 30% on shares will have:

A) greater gross cash earnings than its assessable income.
B) greater assessable income than its gross cash earnings.
C) gross cash earnings equal to its assessable income.
D) either a or c

Question 7

To be a complying superannuation fund the trust deed provisions of the fund:

A) must be equivalent to the SIS Act.
B) may be narrower than the SIS Act.
C) may be broader than the SIS Act.
D) have no direct relationship with the SIS Act.

Question 8

Other than for disability or financial hardship, the earliest age that a person can generally access all of their accumulated superannuation balance is:

A) 55 years of age
B) 59 years of age
C) 65 years of age
D) none of the above

Question 9

For an accumulation-based superannuation account, the investment risk is borne:

A) equally by the superannuation fund member and the employer.
B) by the employer.
C) by the superannuation fund member.
D) 25% by the superannuation fund member and 75% by the employer.

Question 10

The fiduciary responsibilities of superannuation fund trustees in Australia are based on the:

A) common law.
B) Superannuation Industry (Supervision) Act.
C) both a and b
D) the APRA Act.

Question 11

Concessional (tax-deductible) contributions to a superannuation fund within the relevant cap are:

A) tax-free when received by the fund.
B) taxed at 10% when received by the fund.
C) taxed at 15% when received by the fund.
D) taxed at 15% when withdrawn from the fund.

Question 12

Janine has exceeded her concessional superannuation contributions cap by $5,000 for the financial year. She will pay additional "penalty tax" ignoring the Medicare levy on the excess at a rate of:

A) 15%.
B) 30%.
C) 45%.
D) her marginal tax rate.

Question 13

An eligible superannuation contribution made on behalf of a spouse has which of the following features?

A) Is tax-deductible to the spouse making the contribution.
B) Is treated as a tax-free component of the spouse upon withdrawal from a superannuation fund.
C) Is taxed at a concessional rate of 10% when received by the fund.
D) All of the above.

Question 14

The 'in-house' assets rule exempts:

A) residential property.
B) business real property.
C) both a and b
D) unlisted Australian securities.

Question 15

Tax-free lump sum withdrawals from superannuation accounts by individuals are generally available:

A) once the individual reaches 55 years of age.
B) once the individual reaches 60 years of age.
C) is only available to a family member on the death of the individual.
D) none of the above.

Question 16

Kyle Templar is still working full-time at 77 years of age. The maximum amount that he can contribute as a personal superannuation contribution in the current financial year (2014) is:

A) $25 000
B) $35 000
C) $150 000
D) $0

Question 17

In Australia, the rate of superannuation coverage for employees and the minimum rate of superannuation contributions required under the superannuation guarantee system in the last 25 years have:

A) both increased substantially.
B) both decreased substantially.
C) remained relatively constant.
D) had no relationship.

Question 18

Reasonable benefit limits (RBLs) for superannuation account balances:

A) do not currently apply in Australia.
B) currently restrict the lump sum withdrawal able to be made from superannuation by retirees.
C) currently restrict the annual income stream withdrawal able to be made from superannuation by retirees.
D) none of the above.

Question 19

Salary sacrifice superannuation contributions are:

A) tax-deductible to the employer making the contribution.
B) treated as tax-free upon receipt by the recipient superannuation fund.
C) a decision that must be made retrospectively.
D) all of the above.

Question 20

Unfunded superannuation schemes in Australia:

A) represent a financial liability to the fund employer/sponsor.
B) are typically limited to public sector schemes.
C) both an and b
D) none of the above.

Question 21

Briefly discuss why a superannuation fund member's benefit balance is subject to the preservation rules.

Question 22

Ms. Rachel Davidenko is a 42 year-old self-employed hairdresser and operates a business called Short Cutz at the local shopping centre. She has sought your advice prior to the end of the 2015 financial year as to how she can reduce her tax payable via maximising superannuation contributions given that her accountant has advised that her net business income for the 2015 financial year will be $100,000. Rachel has no other assessable income or tax deductible amounts in the 2015 year.
a) What is Rachel's maximum tax-deductible superannuation limit in the 2015 financial year?
b) Suppose Rachel plans to contribute $35,000 to her superannuation fund by the end of June 2015. Explain the effect on her tax situation.

Question 23

Despite increases in longevity, there is a trend towards earlier retirement than that which has traditionally occurred. Given the adverse financial consequences for government that this is likely to produce, what changes has the government made in more recent times in order to encourage people to continue accumulating retirement savings, particularly from continuing to work, for periods longer than otherwise?

Question 24

Why would it be expected that the vast majority of newly created employer sponsored private sector superannuation funds would be established as accumulation/defined contribution schemes instead of defined benefit schemes.

Question 25

Using the individual tax rate table in chapter 3 of the text, calculate the amount of tax that Mr. Robbie Anders (56 years of age) would save by contributing $35,000 as a salary sacrifice superannuation contribution in the 2015 financial year instead of receiving the same amount ($35,000) as part of his annual salary of $105,000. For the purposes of this question ignore the Medicare levy and any superannuation guarantee payments for this year.

Question 26

As the accountant for the Allied Employees Union (AEU) Superannuation Fund, you have been entrusted with the responsibility of preparing the fund's 2015 income tax return. During the 2015 financial year a record of all cash inflows and outflows affecting the fund has been retained and are shown below:
$\begin{array}{llr}&\text { Details } & \text { Amount (\$) } \\\text { Inflows: } & \text { Employer contributions } & 32,000 \\& \text { Employee contributions } & 10,000 \\&\text { Spouse contributions } & 6,000 \\&\text { Government co- contributions } & 3,000 \\&\text { Interest } & 3,600 \\&\text { Fully franked dividends (@30\%) } & 2,000 \\&\text { Unfranked dividends } & 1,900\\\text { Outflows: } & \text { Accounting fees }&2,000 \\&\text { Audit fees } & 1,000 \\&\text { Bank charges } & 804 \\&\text { Government levies } & 200 \\&\text { Allocated pension payments } & 19,000 \\&\text { Share purchases } & 14,000\end{array}$
a) Calculate the 2015 assessable income for the AEU Superannuation Fund.
b) Calculate the 2015 allowable deductions for the AEU Superannuation Fund.
c) Calculate the 2015 taxable income of the AEU Superannuation Fund.
d) Calculate the 2015 net tax payable of the AEU Superannuation Fund.

Question 27

Briefly explain why the concept of fiduciary responsibilities is so important for trustees of superannuation funds.

Question 28

Provide an explanation for the introduction of the choice of fund provisions and their relationship to the more recently introduced Mysuper reforms.

Question 29

a) What was the purpose of the introduction of compulsory superannuation contributions and the government's superannuation guarantee scheme?
b) Do you consider the superannuation guarantee scheme has significantly contributed to its objective?

Question 30

a) Given the information for the AEU Superannuation Fund as stated in the previous question, calculate the fund's 2015 before-tax return as a percentage on an average fund investment of $42,450.
b) Given the information for the AEU Superannuation Fund in the previous question, calculate the fund's 2015 after-tax net cash flows.