Glossary

The total amount of money held by a fund on behalf of a member being the sum of all contributions and earnings, minus fees, insurance premiums, benefits paid and tax.

An accumulation fund is sometimes called a defined contribution fund or allocated fund. It is a fund where the benefit a member receives is the total of all the contributions made to the fund plus earnings on those contributions, minus expenses, tax and any investment losses. Most new superannuation funds are accumulation funds, including almost all industry funds. In the case of an accumulation fund, members carry the investment risk. That is, if the investments perform poorly, member benefits are directly affected.

A person for whose benefit assets are being held. Beneficiaries of a superannuation fund are the members and their dependants.

Refers to the capacity of employees to nominate the superannuation fund into which compulsory employer superannuation contributions must be made. Certain types of employees are ineligible for choice of fund:

• Employees whose ‘contributions’ are made to unfunded public arrangements.
• Commonwealth employees who are members of the CSS, PSS and employees receiving productivity benefit payments, until such time as legislation is enacted giving them choice.
• People for whom contributions are being made in accordance with: An Australian Workplace Agreement under the Workplace Relations Act, or A certified agreement under the Industrial Relations Act.
• People for whom contributions are being made under a prescribed law.
• Defined benefit fund members where the employee would retain an entitlement in the DB fund even if future contributions were paid to a chosen fund.

The co-contribution is made by the government to a person's superannuation account.

Since 2009-2010, a co-contribution of up to $1,000 is payable to persons who are under age 71 and who make personal (undeducted) contributions to a superannuation fund and whose total income is less than the upper threshold for the year. To receive the maximum co-contribution amount total income must be less than or equal to the lower threshold amount. For 2011-2012 the lower and upper thresholds are $31,920 and $61,920.

These include before-tax contributions made by employers to a superannuation fund (such as the SG contributions and employees’ salary sacrificed contributions), and contributions.

Concessional contribution cap
From 1 July 2009 the maximum amount of concessional contributions that can be contributed in a financial year in respect of a member without a tax penalty being imposed is $25,000. Until 30 June 2012, those aged 50 or more can contribute up to double the normal cap.

The Government has announced its intention to legislate to permit, from 1 July 2012, an additional $25,000 per annum to be contributed in respect of a person aged 50 or older and with accumulated superannuation entitlements of less than $500,000.

Non-concessional contribution cap
Is the maximum amount of non-concessional contributions that can be made in respect of a fund member. Contributions in excess of the cap are subject to a tax and must be withdrawn from the superannuation system. The non-concessional contributions cap is set at six times the concessional contributions. For 2010/11 the non-concessional contributions cap is $150,000.

A default fund (also known as the employer fund) is the superannuation fund nominated by an employer to receive the superannuation contributions for its employees in the event they don’t nominate any other fund. Default funds must meet minimum requirements set out in the regulations.

A Defined Benefit fund is a superannuation fund where the formula for calculating the retirement benefit (and possibly other benefits also) is specified in terms of years of service with the employer (or years of membership of the fund) and average salary level over the last few years prior to retirement. (E.g. the formula may be that a member on retiring will receive 15 per cent of final average salary for each year of membership.) The employer-sponsor of a defined benefit fund carries the investment risk (the defined benefits that the members of the fund receive do not depend on the investment performance of the fund). If investment returns are low, the employer may need to increase company contributions to enable the fund to meet its required payouts.

The spouse, child or any other person who, in the opinion of the superannuation provider, financially relies on that member, or Retirement Savings Account (RSA)-holder. Superannuation Industry Supervision and RSA legislation defines dependant as the spouse and any child of the member. A child includes a stepchild, an adopted child or one born within or outside marriage. Spouse includes legally married or de facto spouse. For benefits tax purposes a dependant must be under 18 years of age or financially dependent. A dependent also includes a person who was in an interdependency relationship with the deceased. From 1 July 2008 a dependant also includes a same sex partner, a child of a same sex partner and someone who is considered to be a child of a person under the Family Law Act 1975.

An eligible rollover fund, is a superannuation fund or approved deposit fund which is eligible to receive benefits automatically rolled over from other funds. ERFs are required to provide member-benefit protection. ERFs generally accept inactive small accounts and lost member account rollovers from other superannuation funds.

The Lost Member register (LMR) is one maintained by the Commissioner of Taxation which contains details about members of funds and RSA holders who have been reported to the Commissioner as having lost contact with their fund or as being inactive.

These are contributions for which no one is entitled to, or does receive a tax deduction for. They are also referred to as after-tax contributions.

A Product Disclosure Statement (PDS) is a document required under the Corporations Act that is given to consumers to describe the key features of a financial product being issued or sold.

The age at which the member can gain access to preserved benefits that have built up in a superannuation fund, ADF or RSA provided the member has permanently retired from the workforce.

The preservation age is gradually increasing from 55 years.

The transfer of an eligible termination payment to a rollover fund or to another superannuation fund or RSA. If a superannuation benefit is rolled over, concessional rates of tax apply to the investment earnings on the money rolled over and payment of tax on the benefit is deferred until the money is withdrawn as a lump sum or received as a pension/annuity.

An arrangement between an employer and an employee which involves the employee giving up a part of his/her pre-tax salary in exchange for having the employer provide an alternative benefit, such as superannuation contributions.

A self-managed superannuation fund is one with fewer than five members in which all members are trustees of the fund, and if the trustees are individuals all trustees are members of the fund, or if the trustee is a company all members are directors of the company and all directors are members of the fund. There is a further requirement that no member can be an employee of another member of the fund unless the members involved are related. Special rules apply for single member funds and when members are co-directors of a company. SMSFs are supervised by the Australian Taxation Office.

Employers in Australia are required by legislation to pay the equivalent of 9 per cent of most employees’ salary or wages to a complying superannuation fund in order to avoid being liable for additional tax. This payment is known as the Superannuation Guarantee.

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