Surcharge Tax

The superannuation contributions surcharge was a Commonwealth Government tax on employer contributions to superannuation funds for high-income earners. Superannuation surcharge was abolished from 1 July 2005. Surcharge debts accrued prior to this date are still payable and accrue interest at the Commonwealth ten year Treasury bond rate.

The surcharge tax rates for each year follow.

Financial Year Surcharge Tax Rate
  

1996 - 2003

15%

2003-04

14.50%

2004-05

12.50%

2005-06

Nil

High income earners were individuals with an “adjusted taxable income” above the minimum surcharge threshold.

The surcharge tax rate commenced at an adjusted taxable income above the minimum threshold and increased by 0.001 per cent for each dollar of adjusted taxable income above the threshold until it reached the maximum surcharge for adjusted taxable incomes of over the maximum threshold.

The surcharge thresholds increased each year to movements in Average Weekly Ordinary Times Earnings (AWOTE). The thresholds for surcharge purposes were indexed annually. The table below sets out these thresholds.

Year Min threshold Max thresholdDenominator

96/97

$70,000

$85,000

$1,000

97/98

$73,220

$88,910

$1,046

98/99

$75,856

$92,111

$1,084

99/00

$78,208

$94,966

$1,118

00/01

$81,493

$98,955

$1,165

01/02

$85,242

$103,507

$1,219

02/03

$90,527

$109,924

$1,295

03/04

$94,691

$114,981

$1,399.31

04/05

$99,710

$121,075

$1,709.20

The rate of surcharge was calculated using the following formula:

ATI - Surcharge Threshold
Denominator

Where:

  • (ATI) Adjusted Taxable Income is your taxable income plus your total surchargeable contributions plus your reportable fringe benefits total.
  • Surcharge Threshold - refer to previous table for the minimum and maximum thresholds.
  • Denominator - refer to previous table for the denominator.

Under previous surcharge legislation, annual employer contributions were termed “surchargeable contributions”. Salary Sacrifice contributions are deemed employer contributions and were included in the “surchargeable contributions”.

For members in defined benefit superannuation funds, such as the Territory’s public sector funds, NTGPASS and NTSSS, employer superannuation contributions are unable to be determined until a member exits the scheme.

The legislation provides that, for members in defined benefit funds, surchargeable contributions are calculated by applying a Notional Surchargeable Contribution Factor determined by the scheme’s actuary to the member’s annual salary.

Superannuation funds, prior to the 2005/06 financial year, were required to report details of each member’s notional surchargeable contributions (irrespective of their salary), each financial year to the Australian Taxation Office.

Members of the Territory public sector funds who have a surcharge debt have the option of either:

  • making payments against their surcharge liability to the NTSO at any time; or
  • deferring some or all their debt until they cease membership from their scheme and receive a benefit entitlement from which the accrued surcharge debt will be deducted.

Commonwealth legislation provides that surcharge assessments which remain unpaid at 30 June each year will have interest applied to the outstanding liability at the Commonwealth’s ten year Treasury Bond Rate applicable on 30 June of that year.

The following table shows the ten year Treasury Bond Rate history since 1999.

As at 10 year Treasury Bond Rate

30 June 2001

6.04%

30 June 2002

5.99%

30 June 2003

5.01%

30 June 2004

5.87%

30 June 2005

5.11%

30 June 2006

5.79%

30 June 2007

6.26%

30 June 2008

6.45%

30June 2009

5.52%

30 June 2010

5.09%

30 June 2011

5.21%

30 June 2012

3.04%

30 June 2013

3.76%

30 June 2014

3.54%

30 June 2015

3.01%

Members who have a surcharge liability should seek financial advice on the most tax effective method of paying their surcharge liability.

Queries and complaints regarding the determination of a member’s “adjusted taxable income” should be directed to the ATO Superannuation Hotline on 131020.

Examples of Surcharge Liability for 2004-05 Financial Year 

Employee A

$

 

Income (all sources)

53 000

 

Less:    Deductions

1 500

 

Taxable Income

51 500

 

Add: surchargeable contributions

6 000

 

Adjusted Taxable Income

57 500

 

Under $99,710 no surcharge payable

 

Employee B

$

 

Income (all sources)

98 710

 

Less:    Deductions

2 000

 

Taxable Income

96 710

 

Add: surchargeable contributions

8 000

 

Adjusted Taxable Income (ATI)

104 710

 

surcharge rate

$104 710 - $99 710

=2.93%

$1 709.20

  

2.93% of surchargeable contributions

(ie $8,000) = $234.40 surcharge tax

 
     

Employee C

$

 

Income (all sources)

140 075

 

Less:    Deductions

6 000

 

Taxable Income

134 075

 

Add: surchargeable contributions

10 000

 

Adjusted Taxable Income (ATI)

144 075

 

ATI is over maximum threshold of $121 075

 

Maximum rate of 12.5% applies on surchargeable contributions

$10 000 x 12.5% = $1,250 surcharge tax

 

Any Further Questions?

The ATO web site at www.ato.gov.au/super has further information regarding superannuation surcharge.

Last updated: 27 March 2018