PKF "Break it down" - Superannuation

What is Superannuation?

Superannuation is cash set aside over your lifetime to assist in funding your retirement. It generally cannot be accessed until you reach an eligible age, however hardship provisions may allow early access.

What are Superannuation Funds?

There are two types – public offer (e.g. industry funds) and Self-Managed Super Funds (SMSF).

Typically public offer funds are used by those with lower balances in superannuation or who do not wish to take on the additional compliance burden.

(It is said that in order for the additional compliance costs of a SMSF to be worthwhile – i.e. breakeven against fees for an industry fund – a member balance should be at least $250,000)

Why are contributions made?

Employers are required to make compulsory superannuation contributions at 11.5% of an employee’s ordinary times earnings (OTE) – increasing to 12% from 1 July 2025.

Additional voluntary contributions can be made subject to limits and varying tax treatments.

The Government may also make contributions or ‘co-contributions’ for low income earners.

How does a Superannuation Fund work?

Like a trust, a superannuation fund is established under a deed and must have a separate legal entity as trustee (either individual(s) or a company).

Each member must be a trustee or a director of the trustee company so their interests are represented.

Amounts contributed are allocated to member accounts (think ‘buckets’ within the fund) and taxation implications and pension requirements are subject to the state of each member account.

What are some tricks and traps?

Specific advice regarding a client’s superannuation fund generally falls under financial advice – which accountants are generally not licenced to give. Business Advisory Services only identifies potential opportunities and then actual advice regarding contributions / establishment etc is completed by the financial planners at PKF Wealth (PKFW) and the PKF Newcastle Super team.

In order to be tax deductible in the current year (subject to all other provisions), contributions must be paid (i.e. cleared the bank account) by 30 June.

Compulsory employer contributions must be paid by the 28th day of the month subsequent to each quarter. If paid outside this, the ATO’s regime imposes harsh penalties and denies deductibility.

Superannuation funds are generally taxed at 15% on earnings (including capital gains at 10% in some cases and including deducted contributions).

How does it relate to the work we do for our clients?

We need to be aware if our clients have a SMSF and / or a relationship with PKFW to ensure we have all necessary information. Clients expect to receive a seamless service from “PKF” – whether that is PKF BAS / PKFW / Super.

As superannuation can be a fantastic tax-saving mechanism, our clients will typically have some superannuation activity or considerations that impact their compliance work and ongoing planning.

As part of completing tax planning, we must speak with their financial planner (whether or not at PKFW) and ensure the best commercially viable tax outcome is achieved. We may also need to remind clients when contributions are due (per tricks and traps).

For more information

Employers Superannuation: https://www.ato.gov.au/Business/Super-for-employers/

Individual Superannuation: https://www.ato.gov.au/Individuals/Super/

Ordinary Times Earnings: https://www.ato.gov.au/Business/Super-for-employers/In-detail/Calculating-and-paying/Using-ordinary-time-earnings-to-calculate-the-super-guarantee/