The money coming out of super: fees, charges and tax

Like it or not, money will be taken out of your super savings from time to time. But the good news is that a little awareness can help you reduce this figure. Let’s take a look.

What fees apply to my super account?

All superannuation products charge fees. If you’ve already got a super fund, check your Annual Statement. If not, read the Product Disclosure Statements to compare each product’s fees.

Fees that you may be charged include (but are not limited to):

• Contribution fees – The fee for the initial and subsequent investment you make to the plan (or by an employer). The fee is deducted from each contribution received at the time it is received. The contribution fee is not deducted from Government co-contributions (although it is charged on rollovers for Flexible Lifetime – Super).
• Administration fees – These cover the general administration of the plan.
• Investment management fee – This is the fee for managing the account's investments. Performance Based Fees may apply to some investment options.
• Expense recoveries – This is an estimate of the out-of-pocket expenses the trustee is entitled to recover from the plan.
• Member fee – This is a member account-keeping fee paid from your account.
• Exit fees – This is where you are charged a fee for making a withdrawal or leaving an account.

Other possible costs included in the unit price may be:

• Costs of transacting (including fees charged by investment managers).
• Costs of maintaining direct investment and real property.
• Performance based fees – some investment managers may be given investment performance targets, which give them the incentive to produce better results for your fund.

What are my insurance premiums?

If your super account has insurance cover included, the insurance premiums will also be deducted from your super account. Your insurance premium is calculated annually, and it depends on the amount and type of cover, your age and the premium rates applying to your plan.

The premiums will be deducted from your account at the end of every month (unless your employer has agreed to pay your premiums). If you have insurance cover, it will be shown on your Annual Statement.

What about taxes?

Super is taxed at a much lower rate than most other investments.

Earnings from non-super investments are generally added to your taxable income and then taxed at your marginal tax rate (this can be as high as 45% + 1.5% for Medicare levy). Super investment earnings, on the other hand, are only subject to a 15% tax rate.

You have to pay tax on super when:

• contributions are made
• your money is invested
• you withdraw money from super before age 60 (from age 60 it’s tax-free).
• You don’t provide your Tax File Number (TFN) to your super fund. This is called “No-TFN tax”.

Be aware that taxation and social security laws are very complex and can change regularly. It is recommended you discuss your circumstances with your financial planner or tax adviser.
 

For the 2006/2007 financial year (indexed annually):

^*Add Medicare levy

Tax for not providing your TFN to your super fund: "No-TFN tax"

• A tax of 31.5% applies to Concessional Contributions if you have not provided your TFN to your superannuation fund.
• This tax is generally deducted at the earlier of 30 June each year and when you leave your super fund.
• This tax can be refunded but only if you supply your TFN to your super fund within 4 financial years of making the contribution.
• Also, if you don’t provide your TFN to your fund, they cannot accept member or spouse contributions.