Brush up on the super lexicon with our extensive glossary.
15% pension offset: A 15% tax offset available against assessable pension income if you use super money to purchase a pension income stream. The tax offset reduces your tax liability.
ABS: Australian Bureau of Statistics
Account-based pension: Regular retirement income stream purchased with money from your super fund after you have reached preservation age.
Accumulation fund: Also known as a defined contribution super fund and the most common type of super fund. Retirement benefits are calculated based on contributions received plus investment returns less fees and taxes.
Accumulation phase: Period when you are contributing to your account. All contributions made during this phase are locked away (preserved) until your retirement.
Active member account: Open super fund account that received contributions, rollovers or made benefit payments within the past two years.
Actuarial certificate: Document prepared by an actuary certifying the amount of an SMSF’s investment earnings come from either the accumulation or retirement phase.
Adjusted taxable income: ATO calculation used to determine eligibility for certain government benefits and services. Includes items such as taxable income, adjusted total fringe benefits, reportable employer super contributions, deductible personal contributions and net investment losses.
Administration expenses: Expenses relating to the administration and operation of a super fund.
Administration fee: Fee charged to fund members to cover expenses relating to the administration or operation of a super fund.
Advice fee: Fee charged to cover the cost of providing financial product advice to a super fund member who requests it.
Age Pension: Fortnightly government payment for eligible people who have reached Age Pension age, meet the residency requirements, and pass the assets and income means tests.
Age Pension age: Age at which you become eligible to receive a regular Age Pension payment. The age varies depending on your date of birth and is age 67 from 1 July 2023.
Age Pension assets test: Part of the means test applied to determine eligibility for the Age Pension. To receive a full or part Age Pension, you must fall within the current asset thresholds.
Age Pension income test: Part of the means test applied to determine eligibility for the Age Pension. There are income thresholds you must fall within to receive a full or a part pension.
Age Pension Work Bonus: Allows the first $300 of income per fortnight to be disregarded under the Age Pension income test if you are still working. All pensioners over Age Pension age are eligible.
Annuity: Retirement income product purchased with a lump sum. Annuities provide regular fixed payments for the remainder of your life, or a set period. Annuity payments protects your rate of return against movements in financial markets.
Anti-detriment payment: An additional lump sum amount paid to the eligible dependant of a super fund member who dies (in addition to a lump sum death benefit that is paid to the dependant on the super fund member’s death). The additional lump sum payment is a refund of the 15% contributions tax paid by the super fund member during their life.
Fund trustees can claim a tax deduction for any anti-detriment payments made to eligible dependants of deceased super fund members. These dependants could include:
- spouses,
- former spouses,
- children/adult children,
- trustees of deceased estates.
However, it’s important to note that anti-detriment payments were banned for any super fund member deaths from July 1, 2017 onwards. Funds can still make anti-detriment payments to eligible dependants up to 30 June 2019 for members who died prior to 30 June 2017. After that date, no further anti-detriment payments will ever be able to be made by super funds.
ASFA: Association of Superannuation Funds of Australia. Industry body with members including super funds and service providers from the corporate, industry, retail and public sectors.
ASFA Retirement Standard: Benchmark for retirement budgets reflecting the amount a person would need to fund either a ‘modest’ or ‘comfortable’ standard of living. Modest retirement budget is slightly higher than the Age Pension, while comfortable budget is approximately 50% higher.
Assessable income: Assessable income must be declared on your tax return each year. Includes income from employment; super pensions and annuities; investments; businesses, partnerships and trusts and foreign sources.
Asset allocation: Your mix or allocation of investment assets across different asset classes. Asset allocations can be customised to suit your investment goals and risk profile.
Asset class: Category of investment assets available to investors and super funds. Includes cash, fixed interest/bonds, shares, property or unlisted infrastructure.
Asset consultant (or investment consultant): Professional providing sophisticated advice to a super fund on investment products, asset allocation and investment strategies to help the fund reach its investment goals.
Australian Financial Complaints Authority (AFCA): Government agency providing a dispute resolution service for the financial industry. AFCA is authorised to hear consumer and small business complaints about credit, finance, loans, insurance, banking, investments, financial advice and super.
Australian Financial Services Licence (AFSL): An AFSL is necessary to conduct a financial services business. Issued by ASIC, an AFSL is required by an individual or organisation (including super funds) to provide personal financial advice.
Australian Prudential Regulation Authority (APRA): Regulates and supervises organisations operating in the banking, insurance and super sectors in Australia and ensures their compliance with legislation.
Australian Securities and Investments Commission (ASIC): Regulates companies, markets and financial services providers to ensure compliance with the Corporations Act. Issues AFSLs to financial advice providers.
Australian Taxation Office (ATO): Australia’s tax revenue collection agency. The ATO is responsible for administering tax and super legislation and can impose civil or criminal penalties for non-compliance.
Automatic acceptance: Provision of insurance cover through your super fund without need to provide personal health information or undergo a full medical.
Best interests: Under the Superannuation Industry (Supervision) Act, super fund trustees are required to act and make decisions in the ‘best interests’ of fund members. APRA can impose penalties on trustees breaching this duty.
Binding death benefit nomination (BDBN): With a valid BDBN, super fund trustees must pay your super death benefit to the nominated beneficiaries, in the proportions you list. BDBNs override the normal trustee discretion on paying a super death benefit.
Bond (or fixed income): Fixed income instrument representing a loan by an investor to a borrower. Usually issued by governments or corporations and traded as an investment asset.
Bring-forward rule: Rule covering non-concessional super contributions. Allows you to advance or bring forward your contributions caps from a three?year period and use them over a shorter period – either all at once or as several large contributions.
Buy/sell spread: Covers the transaction costs a super fund pays when it buys and sells investment assets.
Carry-forward contributions: Rule allowing you to accumulate any unused portion of your annual concessional contributions cap for up to five years. Allows you to make concessional contributions over the annual contributions cap (currently $25,000).
Capital gain: Difference between the cost base of an asset when it is purchased and the proceeds from its sale.
Capital gains tax (CGT): Form of income tax payable on any capital gain made from the sale of an investment asset (such as property or shares).
Centrelink: Government agency within Services Australia. Responsible for delivering social security payments and services to Australians.
CEPAR: The ARC Centre of Excellence in Population Ageing Research (CEPAR) produces world-class research on population ageing.
Choice liability: Penalty payable for not offering eligible employees choice of super fund, not actioning valid choice within two months, or for charging employees a fee for making SG contributions or changing fund.
Choice of super fund: Eligible employees are permitted to nominate the super fund into which their employer pays their SG contributions.
Chosen fund: Super fund an employee has nominated to receive their SG contributions. Nominations must be on a completed Standard Choice Form or in writing.
Co-contribution: Contribution (up to $500) made by the Australian Government into an eligible low or middle-income earner’s super account after they make a voluntary contribution.
Clearing house: Commercial operation providing super transfer service to employers. Allows employers to make a single online payment covering their SG contributions for employees.
Collectables and personal use assets: SMSF investment assets with special compliance obligations. These assets must not provide a present-day benefit to fund members. Examples including artwork, jewellery and antiques.
Commissions: Incentive-based rewards for individuals or organisations selling financial products (including super). Commission-based financial advice can result in a conflict of interest for the adviser.
Commonwealth Seniors Health Card (CSHC): Government concession card allowing eligible Australians to access cheaper healthcare services and prescription medicines under the Pharmaceutical Benefits Scheme.
Commutation: Process of converting your super income stream into a super lump sum payment.
Compassionate grounds: Basis for application to access your super benefit before your preservation age. Only available if you meet strict eligibility conditions.
Complying super fund: Complying super funds qualify for a concessional tax rate of 15%. Must be an Australian super fund all times during the income year, comply with the SIS Act and Regulations, and have not been issued with a Notice of non-compliance.
Concessional contributions: Also known as before-tax contributions. Includes Super Guarantee (SG) contributions, salary sacrifice payments, award contributions and personal contributions for which you claim a tax deduction. Taxed at 15% as they enter your account.
Concessional contributions cap: Cap limiting the amount of before-tax contributions you can make into your super account in a financial year. Contributions above the annual cap incur additional tax.
Condition of release: Condition you must meet to legally access your super benefits. Common conditions include retirement after reaching your preservation age, starting a transition-to-retirement pension and reaching age 65.
Consumer Price Index (CPI): Statistical measure of price movements for a set basket of goods and services over a quarter. Calculated by the ABS, it affects government benefits such as the Age Pension fortnightly income limits and cut-off points.
Contribution splitting: Rules allowing you to split your super contributions with your spouse (married or de facto) providing you meet the eligibility criteria.
Contributions tax: Tax paid on super contributions as they enter your super account. Current rates are 15% for concessional contributions, nil for non-concessional and 15% for contributions over the Division 293 threshold.
Corporate fund: Super fund sponsored by either a single employer, or a group of related employers for the benefit of company employees.
Crediting rate: Investment return (as a percentage) achieved annually by each investment option and credited to a super account as investment earnings.
Custodian: Independent organisation appointed by a super fund to hold and safeguard the fund’s assets on behalf of members. Performs specific administrative, unit pricing and accounting functions.
Death benefit: When a member dies, the super fund trustee pays a death benefit (usually the member’s entire account balance) to their dependants or their estate. Usually paid as a lump sum but can be a pension.
Death benefit pension: Some super funds allow your dependants (such as your spouse) to receive your death benefits as a pension when you die.
Deeming: Concept used in the Age Pension income test. Assumes you earn a certain annual rate of return on your investment assets regardless of the actual rate received.
Deemed income: Amount of income assumed to be received from investments like savings accounts, term deposits, managed investments, listed shares and securities, and super pensions and annuities. Based on deeming rate set by Services Australia.
Deeming rate: Variable percentage rate used to calculate the deemed (assumed) income from your financial assets as part of the Age Pension income test, not what return you actually receive from your assets.
Default fund: Super fund selected by an employer to receive SG contributions for its employees if they do not choose (or are not eligible to choose) an alternative super fund.
Default insurance: Insurance cover automatically provided to many fund members when they join their super fund. Usually includes death and total and permanent disability (TPD) cover.
Deferred annuity: Annuity purchased to deliver regular income in retirement where the payments commence after a nominated period.
Defined benefit funds: Super fund where the contributions are pooled rather than allocated to individual member accounts. Retirement benefits are calculated using a formula based on factors such as an employee’s final salary and the duration of their employment.
Defined benefit pension: Pays a guaranteed income stream for life to members of a defined benefit super fund (commonly public servants and employees at large corporations).
Defined contribution funds: Also known as an accumulation fund and the most common type of super fund. Retirement benefits are calculated based on contributions received plus investment returns less fees and taxes.
Division 293 tax: Additional 15% contribution tax on concessional contributions paid by high income earners earning over a set threshold (currently $250,000).
Divorce and super: Super benefits can be divided between a couple if their relationship breaks down. It’s treated as a special type of property under family law and can’t be split as cash unless a condition of release has been met.
Earnings base: Amount used to work out an employee’s SG entitlement. Usually based on ordinary time earnings (OTE) during the quarter.
Earnings tax: A 15% tax payable on the annual investment earnings generated by your super savings during the accumulation phase.
Employer contribution: Contributions made by an employer on behalf of an employee into their super account. Generally includes SG and award contributions and salary sacrifice contributions.
Employer fund (or default fund): Super fund chosen by an employer to receive compulsory SG contributions if an employee does not nominate an alternative fund, or if they are ineligible to choose one.
Event-based reporting: Requirement for SMSFs to report events affecting members’ transfer balances, including pre-existing income streams, new retirement and death benefit income streams, and commutation of retirement income streams.
Excess contributions tax: Tax payable on super contributions in excess of concessional or non-concessional contributions caps.
Exempt current pension income: Income a super fund earns from assets supporting retirement phase income streams. This income is exempt from tax.
Exit fee: Fee charged to a fund member to recover the costs involved in disposing of all or part of their interests in a super fund.
Financial Advisers Register: Register maintained by ASIC of people providing advice on investments, super and life insurance. Includes products on which they are licensed to advise as well as their qualifications, training and professional memberships.
Financial hardship: Basis for application to access your super benefit before your preservation age. Only available if you meet strict eligibility conditions.
Financial Information Service (FIS): Free service provided by Services Australia to provide information and education about financial matters. Offerings online information and free seminars.
Financial Planning Association (FPA): Professional body for financial planners offering a range of member services including professional development and education.
Financial Services Guide (FSG): Document containing information about a product or service from a financial organisation. FSGs must outline fees, charges and the organisation’s complaints resolution process so consumers can decide if they want the product or service.
First Home Super Saver (FHSS) Scheme: Allows first home buyers to save for a deposit within the tax-friendly super environment. Eligible participants can make contributions up to a maximum of $30,000.
Fixed income (or bond): A fixed income instrument representing a loan by an investor to a borrower. Usually issued by governments or corporations and traded as an investment asset.
Franking credits: To avoid dividend income from a company being taxed twice, shareholders receive a franking credit for tax already paid by the corporation. Shareholders are able to claim a tax offset for the franking credits attached to a franked dividend.
Franked dividends: Dividends or profits paid to shareholders by a corporation paying company tax on part or all of its profit distributed as a dividend.
Future of Financial Advice (FoFA): 2013 reforms to the Corporations Act including a ban on conflicted remuneration and requirements for financial advisers to act in the client’s best interests, provide an annual fee disclosure statement and renew ongoing fee arrangements every two years.
Gainfully employed: Under super law, this means doing paid work for at least 10 hours per week. Affects whether you satisfy the retirement condition of release and whether you can make super contributions for which you are claiming a tax deduction after age 67.
General financial advice: General factual information about financial products. Cannot include a recommendation or suggest a particular product is best for your individual situation.
Global financial crisis (GFC): Term given to a period (mid-2007 to early 2009) where the global financial system experienced a severe shock triggered by sub-prime lending in the US housing market.
Inactive member account: Super account that has not received any contributions, rollovers or transfers, or made any benefit payments within the past two years, but which has not been closed as the member is contactable.
Income stream: Regular series of payments in retirement made from your accumulated super savings or an annuity purchased with a lump sum.
Indexation: Term used to describe adjusting payments, thresholds or limits due to changes in an index. For example, Age Pension asset limits and cut-off points are adjusted three times a year based on CPI movements.
Industry funds: Not-for-profit or ‘profit to members’ super funds originally established to provide access to super for employees working within a particular industry.
In-specie contribution: Latin term meaning ‘in its present form’. These contributions are a non-cash contribution to a super fund, such as property or shares.
Insurance fee: Fee charged to a member for insurance premiums paid by the super fund on their behalf for death, total and permanent disability (TPD) and income protection cover.
Intergenerational Report: Government report released every five years on how changes to Australia’s population size and age distribution will affect policy, economic growth, employment and public finances in the future. Last produced in 2015.
Intra-fund advice: General financial advice provided by super funds to their members. Commonly includes advice on choosing an investment option, salary sacrifice and personal contributions, nominating a beneficiary and insurance cover.
Investment fee: Fee charged by super funds for services relating to the investment of the fund’s assets.
Investment income: Gross revenue received by the super fund as income or distributions from its investment assets. Includes interest, dividends, rental income and trust distributions.
Investment earnings tax: Investment earnings such as interest, dividends and rental income received by your super account are taxed at 15% during the accumulation phase, less any allowable deductions or credits.
Investment management performance fee: Investment fee determined, in whole or part, by performance of an investment made by an investment manager on behalf of the super fund.
Investment option: Selection of investment alternatives offered to super fund members covering different asset allocations. Usually includes pre-mixed options with a diverse asset allocation and options focused on single asset classes (such as international shares or Australia property).
Lifecycle fund: Super fund product available in the accumulation phase that increases the relative weight of defensive assets (such as cash) versus growth assets (such as equities) in the investment option as the member ages.
Lifetime annuity: Annuity payable over a recipient’s remaining lifetime.
Limited Recourse Borrowing Arrangement (LRBA): Arrangement permitting SMSFs to take out a loan from a third-party lender. Funds are then used to purchase an investment asset for the SMSF that is held in a separate trust.
Longevity risk: The risk a person will outlive their retirement savings.
Lost member: Super fund member who is inactive (no contributions or rollovers) for five years, cannot be contacted, or who has transferred in as a lost member and has not been found or advised a new address.
Low Income Superannuation Contribution (LISC): Contributions made by the government to a member’s super account. Replaced by the Low Income Superannuation Tax Offset (LISTO).
Low Income Superannuation Tax Offset (LISTO): Tax offset to ensure low?income earners don’t pay more tax on their super contributions than on their take-home pay. Eligible low-income earners receive a super contribution of up to $500.
Low and Middle Income Tax Offset (LMITO): Temporary tax offset introduced in the 2018 Federal Budget providing tax relief for eligible low and middle-income earners. Currently due to end 30 June 2022.
Low Income Tax Offset (LITO): Automatic tax offset applied by the ATO to the tax liabilities of low-income earners. Can only be used to reduce tax payable and not to generate a tax refund.
Low-rate cap (or threshold): Indexed limit on the amount of taxable component in your withdrawal amount that can be taxed at a lower (or nil) rate of tax if you reach your preservation age and withdraw your super before turning 60 years old.
Lump sum benefit payment: Payment from your total super benefit taken as a lump sum rather than an income stream.
Marginal tax rate: Percentage rate of tax you pay on an additional dollar of income, which increases as your income rises. The highest (or top) marginal tax rate is currently 45% for each $1 over $180,000 you earn.
Maximum superannuation contribution base (MSCB): Quarterly limit on the salary amount on which an employer has to make SG contributions. Employers do not have to pay super on employee earnings above this limit.
Medicare Levy: A 2% levy on your taxable income to help fund free public access to medical and healthcare services.
Medicare Levy Surcharge: Additional 1% to 1.5% (depending on income) surcharge paid by higher income earners if they do not have an appropriate level of private health insurance cover.
Member contributions: Contributions made by a fund member or the government (such as a co-contribution) into the member’s super account.
Member statement: Super funds are required to provide members with a detailed statement outlining information including account transactions and balance, tax and fees paid, insurance and investment return at financial year end.
Minimum super pension payment: Minimum annual amount that you can withdraw from your super pension account. Amount varies based on your age and is set by the federal government.
MoneySmart: Investor and consumer website provided by ASIC (moneysmart.gov.au). Includes calculators to help forecast your super balance at retirement and how fees affect your final balance.
MySuper funds: Simple, low-cost and easy-to-compare option offered by many super funds. Often the default super account for people who don’t choose their own super fund when they start a new job.
Non-arm’s length income (NALI): Income not reflecting a normal arm’s length transaction completed at commercial market values. Can be an issue for SMSFs conducting transactions between fund members or related parties. NALI can result in an SMSF losing its concessional tax status.
Non-binding death benefit nomination: Nomination by a member guiding their fund trustee on how to distribute their super death benefit when they die. Trustees are not required to follow a non-binding nomination.
Non-complying super fund: Non-complying funds are taxed at the higher rate of 47%, compared to the 15% rate for complying super fund.
Non-concessional contributions: Sometimes referred to as after-tax contributions, as tax has already been deducted from the money used for the contribution. Two main types are personal contributions not claimed as a tax deduction and spouse contributions.
Non-concessional contributions cap: Maximum amount you are permitted to contribute into your super account from after-tax income within a financial year. Current annual cap is $110,000 (2021-22).
Non-preserved benefits – restricted: Includes any employment-related contributions made before 1 July 1999, excluding employer contributions. Can’t be accessed until the employment arrangement they relate to has ended.
Non-preserved benefits – unrestricted: Includes any super benefits that can be paid on demand by your super fund because you have satisfied a condition of release.
Ordinary time earnings (OTE): Amount earned during ordinary hours of work, including commissions, bonuses, shift loadings and allowances, but not overtime payments. Used to calculate an employee’s SG contributions.
Pension Bonus Scheme: Tax-free lump sum payment designed to reward people who delay applying for the Age Pension and continue working. Closed to new applicants from 1 July 2014.
Pension phase (now called retirement phase): Period when you are no longer making contributions into your super account and are drawing down on your savings.
Pensioner and Beneficiary Living Cost Index (PBLCI): Compiled by the Australian Bureau of Statistics quarterly to reflect movements in the cost of living for recipients of the Age Pension and government benefits. Used to adjust the maximum basic rate of the Age Pension.
Performance fee: Fee paid to an investment manager used by the super fund to manage the fund’s investments. Payable if the investment manager exceeds its performance target or benchmark.
Permanent incapacity: Fund members who are deemed to be permanently disabled or incapacitated can access their super benefits early. This must be certified by two medical practitioners.
Personal financial advice: Personalised advice by a licensed financial adviser recommending a financial service or product after considering your individual objectives, financial situation and needs.
Pharmaceutical Benefits Scheme (PBS): Government subsidised program to provide cheaper prescription medicines for Australians.
Preservation: Term used to describe the retirement benefit locked away for a super fund member.
Preservation age: Minimum age at which you can withdraw your super benefits once you meet a condition of release. Different from the age at which you are eligible for the Age Pension.
Preserved benefits: Super money that is ‘preserved’ or locked away until you reach your preservation age and meet a condition of release.
Productivity Commission Inquiry into Superannuation: Two-year inquiry into Australia’s super system by the Productivity Commission. Resulted in a detailed report (released January 2019) with numerous recommendations to improve the super system.
Profession of Independent Financial Advisers (PIFA): (Previously called the Independent Financial Advisers Association of Australia.) Professional body offering guidance on how to find an independent financial adviser practising without incentives and conflicts of interest.
Proportioning rule: When a super benefit is withdrawn by a member, its tax?free and taxable components must be in the same proportions as they are in the total super benefit.
Public sector funds: Super funds for public sector employees. Includes workers in local government, Commonwealth and state public services, emergency services and the defence force.
Reportable employer super contributions (RESC): All personal tax-deductible, salary sacrifice and employer super contributions made on your behalf exceeding the SG. Must be reported annually to the ATO by your employer.
Restricted non-preserved benefits: Employment-related contributions made before 1 July 1999, excluding employer contributions. Contributions can’t be accessed until the employment arrangement they relate to has ended.
Retail fund: Super fund run by a financial institution on a commercial ‘for profit’ basis.
Retirement phase (previously called pension phase): Period when you are no longer making contributions into your super account and are drawing down on your savings.
Retirement Savings Account (RSA): Super accounts offered by some banks, credit unions, building societies and life insurance companies.
Reversionary pension: Income stream that continues to be paid to your beneficiary (usually your partner) following your death.
Risk profile: Tool used by financial advisers to identify where you fit on the risk-taking spectrum, so they can determine the best allocation of investment assets given your risk tolerance.
Risk tolerance: How emotionally comfortable you are with taking financial risk.
Robo-advice service: Digital financial advice service using online tools to determine your risk profile and the appropriate allocation of investment assets.
Rollover: Amount transferred between super funds, retirement savings accounts, deferred annuities or approved deposit funds.
Royal Commission into Banking, Superannuation and Financial Services: Established in December 2017, with its final report released in February 2019. Made a number of recommendations for super and financial advice, most of which are yet to be implemented.
Salary sacrifice: Agreement between you and your employer to forego part of your future salary in return for benefits of a similar value (such as super contributions, a car or health insurance). Allows you to pay for the benefit from your before-tax salary.
Small Business Superannuation Clearing House (SBSCH): Free clearing house service that pays and reports an employer’s super contributions for their employees. Eligible employers must have less than 20 employees.
Self-managed superannuation fund (SMSF): Private superannuation fund managed by fund members who must either be trustees or directors of the corporate trustee of the fund.
Seniors and Pensioners Tax Offset (SAPTO): Tax offset if you are eligible to receive an Age Pension or DVA Pension. Offset amount depends on your rebate income and marital status.
Services Australia: Government agency covering the Social Services portfolio. Responsible for Medicare, Centrelink and Child Support payments and services.
Sequencing risk: Risk of experiencing poor investment returns just prior to drawing on your retirement funds. It relates to the pattern of investment returns and the order in which you receive them.
Service provider: Entity or individual providing any type of service to super fund trustees, such as an accountant, asset consultant, custodian, internal auditor, investment manager or lawyer.
Severe financial hardship: One of the circumstances allowing early access to your super benefit. Requires receipt of eligible government income support for 26 weeks, plus being unable to meet your family living expenses.
Severe financial hardship condition of release: Condition of release allowing a fund member suffering severe financial hardship early access to some of their super benefit.
SIS Act: Abbreviation for the Superannuation Industry (Supervision) Act 1993, which is the legislation outlining the main rules governing Australia’s superannuation system.
SMSF Association: Independent professional body representing the interests of Australia’s SMSF sector.
SMSF audit: Mandatory annual audit of SMSF conducted by an independent auditor registered with ASIC. Assesses the fund’s financial statements and compliance with super law, with any non-compliance reported to the ATO.
SMSF trustee (or director): All members of an SMSF must also be a fund trustee or director. Trustees are responsible for ensuring the SMSF’s compliance with super law.
SMSF trustee declaration: ATO document summarising the duties and obligations of an SMSF trustee (or director). Trustees must sign within 21 days of appointment to indicate they understand their legal compliance obligations.
Sole purpose test: Legal requirement that a super fund is maintained for the sole purpose of providing benefits to members upon retirement (or their dependants if the member dies). Funds must comply or they lose their concessional tax status.
Spouse: For super and tax law purposes, a spouse is someone who is married to the fund member or is in a registered or de facto relationship (including same?sex) with them.
Super Fund Lookup (SFLU): ATO online service providing public information on super funds with an Australian Business Number (ABN), including the fund’s current compliance status.
Superannuation benefits payments tax: Tax payable on benefits withdrawn by a fund member prior to age 60. Rate depends on whether you have reached preservation age, whether it’s an income stream or a lump sum, and the benefit’s tax components.
Superannuation co-contributions: Annual contribution of up to $500 by the government to the super account of eligible low- to middle-income earners if they make a personal super contribution. Payment amount depends on the contribution amount and income level.
Superannuation contributions: Cash or in-specie contributions made to your super account. Includes both your personal contributions and those made by your employer.
Superannuation investment earnings tax: Earnings (or returns) such as interest, dividends and rental income received by your super account are taxed at 15% during the accumulation phase, less any allowable deductions or credits.
Superannuation Guarantee (SG): Official term for the compulsory super contributions made by your employer into your super account on your behalf. Current rate is 10% of your ordinary time earnings.
Superannuation Guarantee Charge (SGC): Charge levied by the ATO if an employer fails to make SG payments for their employees by the quarterly deadline. Employers are also required to make a SGC Statement or face an additional penalty.
Superannuation ratings agencies: Companies undertaking and selling research on super funds in areas such as investment returns, fees, insurance options and member services. Includes firms such as Chant West, Rainmaker and SuperRatings.
SuperStream: IT framework agreed by the super industry for transferring payments and data between employers, super funds, the ATO and clearing houses. Streamlines the process for employers making super contributions.
Switching fee: Fee charged to recover the costs of switching all or part of a fund member’s super account to a different investment option within the fund.
Tax (financial) advice: Advice about a financial product and its tax implications. Can only be provided by a financial adviser registered with the Tax Practitioners Board.
Tax File Number (TFN): Personal reference number issued by the ATO for identification within the tax and super system. Without a TFN, you pay more tax and are ineligible for government benefits.
Tax offset: Offset used to reduce or eliminate your income tax liability. Tax offsets can’t be used to create a tax refund.
Tax return: Report lodged annually with the ATO by every Australian earning taxable income. Super funds and SMSFs are also required to lodge tax returns.
Taxable component: Part of a super benefit subject to tax if withdrawn before age 60. Mainly consists of concessional contributions, such as employer and salary sacrifice contributions, investment earnings and contributions claimed as a tax deduction. Further divided into taxed and untaxed elements.
Taxable income: Income on which an individual or super fund is required to pay income tax, less any allowable tax deductions.
Tax-deductible employer contributions: Employers can claim a tax deduction for Superannuation Guarantee (SG) and salary sacrifice contributions made on behalf of their employees.
Tax-deductible personal contribution: You can claim a tax deduction for personal super contributions up to the annual concessional contributions cap ($27,500 in 2021-22) if you meet the eligibility criteria.
Taxed source: Super fund that deducts both contributions tax from concessional contributions and earnings tax from investment returns. Most super funds other than older government funds are a taxed source.
Tax-free component: Mainly the non-concessional contributions in a super account (which are from after-tax income). Can include a crystallised segment (fixed dollar figure for certain pre-July 2007 benefits).
Tax-free retirement phase: If you retire and start a super pension, all the investment earnings from your super assets are exempt from tax. There is a $1.7 million (in 2021-22) cap on the amount that can be transferred into the tax-exempt retirement phase.
Temporary incapacity: One of the circumstances allowing early access to your super benefit. Requires physical or mental ill-health to cause you to temporarily be unable to work or work fewer hours than normal.
Temporary incapacity condition of release: Condition of release allowing a fund member suffering temporary incapacity early access to some of their super benefit.
Temporary resident: Foreign citizen granted the right to stay in Australia for a specific period of time. Temporary residents can access their super when they leave the country via a Departing Australia Superannuation Payment.
Terminal illness: One of the circumstances allowing early access to your super benefit. Requires diagnosis of a terminal medical condition by two medical practitioners.
Terminal illness condition of release: Condition of release allowing a fund member diagnosed with a terminal medical condition early access to their super benefit.
Total salary or wages: Remuneration amount paid to an employee including most allowances, leave and termination payments, and bonuses. Used to work out the SG shortfall amount if an employer’s SG contributions are not paid by the quarterly deadline.
Total Superannuation Balance (TSB): Combined balance of your accumulation and retirement phase super savings at any point in time.
Transfer Balance Cap (TBC): Introduced in July 2017, a cap on the amount that can be transferred to the tax-free retirement phase to start a super pension. Indexed periodically in $100,000 increments.
Transition-to-retirement (TTR or TRIS) pension: Pension that can be started once you reach your preservation age, but before age 65. Allows you to access your super without having to stop work. Investment earnings are taxed at 15%.
Trust: Legal structure where a person/s holds assets or rights on behalf and for the benefit of another. Those holding legal title to the assets are called trustees, while beneficiaries receive the benefit of the assets. All super funds operate as a trust.
Trust deed: Legal document outlining the terms of operation for all super funds. Includes information on the trust’s objectives, members of the trustee board and rules for the trustee in implementing the investment strategy and managing the fund.
Trustee (or trustee board/directors): Person or group of people responsible for managing a super fund and ensuring its legal compliance on behalf of the super fund members.
Unclaimed super: From 1 July 2019, super funds must report and pay all inactive low-balance accounts to the ATO. Includes unclaimed super of members aged 65 and over, non-member spouses and deceased members; small lost member accounts and inactive low-balance accounts.
Unit pricing: Methodology used by super funds to work out the changing value of your super account. Like shares in a listed company, the value of units in each investment option fluctuate daily.
Unrestricted benefit: Money within your superannuation fund that can be accessed at any time because you have already met a condition of release.
Unrestricted non-preserved benefits: Benefits that can be paid to a fund member on demand because they have satisfied a condition of release. Anyone who has met a condition of release and leaves assets in their super account has unrestricted non-preserved benefits.
Untaxed plan cap amount: Maximum amount of untaxed elements in a super benefit that can take advantage of the concessional tax rates applying to super withdrawals. Any amount of this cap is taxed at the top marginal tax rate.
Untaxed source: Super fund that doesn’t deduct contributions tax from concessional contributions and earnings tax from investment returns until the member leaves the fund. Generally older public sector schemes or constitutionally protected super funds.
Work test: If you are aged 67 to 74, you must satisfy the work test to make personal super contributions to your super fund for which you intend to claim a tax deduction. The test requires you to be gainfully employed for a minimum of 40 hours in any 30 consecutive day period.
