Employer Contributions Tax & the ATO Supervisory Levy

Another year, another tax payable. WHY?

Its extremely important to understand the key benefit of a SMSF and that is its concessional tax rate as compared to a members personal tax. Importantly its not all about a “tax refund” generally any losses are carried forward in the super environment. There will be on many occasions “tax payable“ for the year which is derived from all assessable income received into the fund and is taxed at a concessional rate of 15%.

Assessable income like dividends, rent and interest are easily identifiable. However, Concessional Contributions are also considered as assessable income.

Concessional Contributions come in the form of the following: 

• Employer Superannuation Guarantee
• Salary Sacrifice payments to your super fund

To be clear, ALL Superannuation funds must pay tax on these contributions at a tax rate of 15%.

• • For an SMSF – tax is always payable at year end when a tax return is produced.

• For a Retail/Industry Super Fund – contribution tax is payable as the fund receives the contribution. Many of us do not notice that this tax is even being paid, as the final tax payable is administered by the fund itself. 

Below is an extract of Australian Super’s transaction summary, showing the Contribution tax being paid:

Note – the above table is extracted for illustration purposes only.

In addition to paying tax on your assessable income, you may also notice an ATO Supervisory Levy being charged. This special levy is payable to the ATO regardless of your tax outcome and covers the ATO’s costs for the regulating all SMSFs. This tax-deductible expense is currently $259 (2019FY) but is subject to change – see table below:

Its important for SMSF members to understand the calculation of tax in a SMSF and be able to differentiate tax calculation from a personal marginal tax rate.

Disclaimer – The content has been prepared by Redwood Wealth Pty Ltd & Redwood Advisory Pty Ltd without taking account of the objectives, financial situation or needs of a particular individual and does not constitute financial product advice. This article should not be considered personal financial advice as it is intended to provide factual information only. 

Ivan Filipovic is an authorised representative of First Mutual (AFSL 423710). Redwood Wealth is a Corporate Authorised Representative of First Mutual (1244359)