Don’t forget your TFN
Low income earners will be the hardest hit by the introduction of a new tax penalty for those who fail to provide their superannuation fund with a tax file number (TFN), according to the Australian Institute of Superannuation Trustees (AIST).
In addition to the standard 15 per cent rate of tax payable by super funds on taxable income, fund members who have yet to quote their TFN will get hit with a 13.5 per cent tax penalty.
The Australian Tax Office has estimated that there are currently 1.1 million ‘active’ super accounts, or 8 per cent, who have not filed a tax file number.
According to AIST, the penalty will hit those who can least afford it with the ATO estimating that one-third of those accounts without a TFN, or 350,000 accounts, have more than $1,000 of annual contributions received each year, the point at which the top marginal tax penalty applies.
AIST chief executive officer Fiona Reynolds said that the tax for the non-quotation of TFNs should be applied to the end benefit and not the accumulation phase.
“We know that the collection of TFNs is difficult. Those that suffer the most due to the higher tax are more likely to be those with small accounts, or transient workers such as those working in the retail industry,” Reynolds said.
“In addition to the higher penalties, funds cannot accept personal contributions without a TFN and nor can members be eligible for the Government co-contribution.”
Super funds have until June 30, 2008, to collect TFNs after which the penalty will apply.
Fund members have three years to claim a tax offset on any tax penalty once they provide their TFN.
The ATO has already advised 1.85 million super account holders that their TFN would be automatically supplied to the fund unless they objected.
Early next year the TFN collection campaign will continue with a planned 700,000 members having their TFNs provided automatically.
Recommended for you
The top five licensees are demonstrating a “strong recovery” from losses in the first half of the year, and the gap is narrowing between their respective adviser numbers.
With many advisers preparing to retire or sell up, business advisory firm Business Health believes advisers need to take a proactive approach to informing their clients of succession plans.
Retirement commentators have flagged that almost a third of Australians over 50 are unprepared for the longevity of retirement and are falling behind APAC peers in their preparations and advice engagement.
As private markets continue to garner investor interest, Netwealth’s series of private market reports have revealed how much advisers and wealth managers are allocating, as well as a growing attraction to evergreen funds.
