In this edition of the Employer Newsletter, provide a summary of the measures proposed in the recent Federal Budget which will affect employers or which may trigger enquiries from members of staff. We also include an article about the name changes for the "Trustee Selection" investment strategy in the Retirement and Defined Benefit Schemes and the reasons for those changes.

There are also a few administration reminders and updates and an article on which contribution amounts should be included in Payment Summaries for Retirement and Defined Benefit Scheme members.

As usual, we update you on the Energy Industries Superannuation Scheme's investment performance and our forthcoming seminar schedule.

We value your feedback, so please feel free to send us your comments or any suggestions on what articles you'd like to see in future newsletters by emailing: employerservices@eisuper.com.au

Administration update

Contributions for those over age 70 years

Remember to warn employees approaching the age of 70 that you will soon no longer be able to make superannuation contributions on their behalf.

Under superannuation law, employers cannot make Superannuation Guarantee (SG) contributions on behalf of staff members after they turn 70 years of age. However, employers can contribute for those over the age of 70 if they are required to under an award agreement.

Employers should advise us of any contributions paid under an award agreement as "award" contributions when remitting contributions.

Mandated contributions, which are contributions agreed to as part of an agreement between the employer and employee, can continue to be made past age 70. Employers should advise of mandated contributions as "award" contributions when remitting contributions.

Employees aged 70 to 74 are free to make their own personal superannuation contributions from their after-tax income, or to direct their employer to make salary sacrifice contributions on their behalf.

The only requirement is that an individual making contributions must have worked a minimum of 40 hours over a period of 30 consecutive days. If they fail to meet this work test, no contributions can be accepted for that person other than mandated contributions.

Exiting members

When completing the Employment Termination Advice (ETA) form please ensure that if you still have to remit contributions for the member after you forward the ETA, you answer "No" to the question: "Have all contributions for this member been paid?"

Please advise the date they are likely to be paid in the date boxes. For Div B and Div D members also advise the outstanding amount to be remitted.

When a Div B or Div D member ceases employment due to retrenchment please ensure sections 3(1) and 3(2) of the ETA form are completed.

New members

In line with the EISS rules, we are not permitted to create a new member account without having received a contribution for the account. Please advise of any new members when providing their initial contribution rather than providing the new member advice prior to sending the contribution.

You can provide the new member details in the contribution file or separately, but if you have a separate new member file, please send it at the same time as your contribution file. Please ensure that you include the new employee's full given names and surname, date of birth, address, date they commenced employment and their Tax File Number.

Please remember to update your Payroll system with the member numbers for your new employees which are sent to employers in a fortnightly letter following the creation of the member's account.

Accumulation Scheme - Contributions

It is important that you correctly identify the contributions that you remit in your contribution files. The contribution types are:

Superannuation Guarantee (SG) - most employees under the age of 70 are entitled to this minimum compulsory employer superannuation contribution which is currently 9% of ordinary time earnings.

Member Post-tax contributions (MV) - employees may arrange for contributions to be deducted from their post tax salary or wages as personal contributions to their own account.

Member Pre-tax contributions (SS) - employees may arrange for contributions to be deducted from their pre tax salary or wages as salary sacrifice contributions to their own account.

Award contributions - employers may make additional contributions for members on top of SG contributions. These may be compulsory contributions under an award or industrial agreement.

Spouse contributions - employees may arrange for contributions to be deducted from their post tax salary or wages and paid into an account set up under the name of their spouse.

SG, SS and award contributions are Concessional contributions and are subject to 15% contribution tax on receipt by the Scheme Administrator. MV and spouse contributions are Non-Concessional contributions.

Please refer to the Employer Handbook for additional information regarding the above.

Please note that Accumulation Scheme files should not include negative contributions. If you have made an error and need money to be refunded, please email the details separately to employerservices@eisuper.com.au.

Retirement Scheme - Contribution correction

Following the introduction of Concessional and Non-Concessional contributions and the associated ATO reporting in 2008 it is important that any corrections across contribution type (Concessional to Non-Concessional or vice a versa) to members' accounts be corrected in the same financial year where possible.

If you do make corrections for a previous financial year, it is important that you also send an email to Employer Services advising of the correction and the financial period it applied to so that we can report the correction to the ATO.

The ATO will assess a member's Concessional and Non-Concessional contributions for the financial year, using each member's TFN and reports from all super funds to track the total of all contributions the member has made to a single fund account, multiple accounts within a fund, or to multiple funds. If the member has exceeded their Concessional or Non-Concessional Cap, the ATO will issue a notice for the required amount to the member directly.

'Trustee Selection' to change its name in the Retirement and Defined Benefit Schemes

A project is underway to segregate the employer and member assets for all Pool B product options in 'Trustee Selection'. This will permit different investment strategies to apply to the employer and member segments of what is now called Trustee Selection and allow a more appropriate investment strategy to be adopted for each segment that will reflect the risk profile of the underlying member and employer contributions and reserves.

The initial phase of the project will allow different investment strategies for the Division B Employer Reserves and the Division B Member (Contributor) Financed Benefit. Division D members, who do not have Member Investment Choice, will continue to have their Member Financed Benefit in the same investment strategy as the employer reserves.

The second phase of the project which will address the possible segregation of pension and insurance reserves has not yet commenced but further information will be provided as it progresses.

One result of the first phase is the need to change the investment strategy name of the member 'Trustee Selection' strategy for both Divisions B and D. The existing member investment strategy for Division B (Trustee Selection) will become 'Growth'. We expect this change will be completed towards the end of the year.

For Division D, the new name will be 'Defined Benefit Selection'. Work on this is expected to be completed by the end of August.

All affected Division B and D members will be notified in writing about the changes.

Budget update

The Federal Budget contained fewer changes to super than the previous one, possibly because the Cooper Review had not presented its final conclusions at the time it was released. The changes it did announce will not take effect for some time but it is important to be aware of them and how they might affect you. The following is a summary of proposed Budget measures which relate directly to employers.

Superannuation Guarantee to rise to 12%

The most significant change in the Budget was the announcement that the SG rate would rise from 9% to 12%. This 3% increase however will be phased in over a six year period with the first increment starting in July 2013 and the final one in July 2019. The table below outlines the effective dates for each rate increase:

Financial year	SG Rate (%)
2009/10 to 2012/13	9
2013/14	9.25
2014/15	9.5
2015/16	10
2016/17	10.5
2017/18	11
2018/19	11.5
2019/20	12

If employers are already making contributions in excess of the minimum SG requirements they will only need to worry about these new rates when they exceed their current level of contributions.

Super Guarantee for people over 70

Australians who continue working between the age of 70 and 75 will be eligible for the compulsory Superannuation Guarantee contributions (currently 9%) for the first time. At the moment people in this age bracket are limited to voluntary salary sacrifice contributions and/or personal post-tax contributions except for those cases where SG contributions are required under an Award. This measure will take effect from 1 July 2013 and is aimed at providing an incentive for older people to remain in the workforce.

Reduction in personal income tax rates

The Government has upheld its commitment to honour the previous Government's tax commitments. In the financial year 2010-11:

• The 30 per cent threshold will increase from $35,001 to $37,001; and
• The second top marginal tax rate will be cut from 38 to 37 per cent. The table below provides a comparison between the previous and new tax rates.

Current rates from 1 July 2009		Effective rates from 1 July 2010
Taxable income ($)	Rate (%)	Taxable income ($)	Rate (%)
0 - 6,000	0	0 - 6,000	0
6,001 - 35,000	15	6,001 - 37,000	15
35,001 - 80,000	30	37,001 - 80,000	30
80,001 - 180,000	38	80,001 - 180,000	37
180,001+	45	180,001+	45

Note: excludes 1.5% Medicare Levy

$50,000 Concessional contributions cap to continue beyond 2012

The Government has proposed to allow individuals age 50 and over with superannuation balances less than $500,000, to make Concessional contributions of up to $50,000 per annum (indexed) after 1 July 2012. This will allow people to top up their super as they approach retirement as long as their account balance is under the threshold.

Co-contributions - Matching level frozen at $1,000

Measures announced in the federal budget 2009-10 reduced the maximum Co-contribution payable on eligible Non-Concessional contributions to $1,000 from the previous maximum of $1,500 and the maximum was going to revert to $1,500 in 2014-15. However, the Government has decided to make the current maximum level of $1,000 permanent.

Furthermore, the Government has indicated it will freeze, for the next two financial years, indexation of the income levels at which Co-contribution payments start to reduce ($31,920) and where it cuts out completely ($61,920). In other words, the rules that applied in the last financial year (2009 -10) will apply for the next two financial years (2010 -11 and 2011-2012).

New Government contributions for low income earners

While the Government has reduced the benefits available to low income earners under the Co-contribution scheme it has introduced a new scheme which will refund the 15% contributions tax levied on employer contributions up to a limit of $500.

The new contribution is equal to the contributions tax payable for someone who is earning $37,000 per year. The maximum payment will be $500 and the first payment will occur in 2013/14 based on contributions made in the 2012/13 financial year.

The contribution for those who earn less than $37,000 per year will be on a pro rata basis. For example, if a member earns $24,000 per year, the employer would normally pay $2,160 in SG which would attract contributions tax (15%) of $324. This member would therefore receive a refund of $324, assuming that they were otherwise eligible.

Eligibility is determined when the member completes their tax return and the Scheme reports contributions to the ATO. The employer is not required to do anything additional in relation to this new scheme.

Contribution caps reminder

As outlined in the Budget update the Government made only minor changes to the contribution caps in the 2010 Budget.

The cap on the amount of Concessional (or pre-tax) contributions members can make to super remains $25,000 a year (indexed). Income that's salary sacrificed as additional superannuation contributions is counted towards the Concessional contributions cap, as is the 9% Superannuation Guarantee.

The transitional Concessional contributions cap (for members aged 50 and over or who turn 50 before the end of the 2011/12 financial year) also remains $50,000 a year although the Government has announced that this transitional cap will be extended beyond 2012 for those over 50 who have a superannuation account balance of less than $500,000.

The annual cap on Non-Concessional or after-tax contributions remains at $150,000 per annum for the 2010/11 financial year and is calculated as six times the level of the (indexed) Concessional contributions cap.

Employers should be aware that employees salary sacrificing may be at risk of exceeding the new contribution caps and of incurring excess contributions tax. Excess Concessional contributions are currently taxed at 31.5% in addition to the standard 15% contributions tax and there are further penalties if a member also exceeds the Non-Concessional cap.

It is not the employer's responsibility to police member contributions but to help your staff avoid any nasty surprises it's important to be conscious of the caps when setting up or adjusting salary sacrifice arrangements for your staff. EISS has a procedure in place designed to alert members to the fact that they are approaching their Concessional or Non-Concessional caps but this will not be foolproof as members may have super accounts elsewhere which we can know nothing about. It is ultimately the member's responsibility to ensure that they don't exceed the caps but if we can help prevent it happening it will make life easier for the members and for us.

If a member requires information about the amounts that they have contributed or are unsure about how the caps work please refer them to Member Services who can be contacted on 1300 369 901. If they require financial advice about the caps they can speak to a FuturePlus financial planner at no additional cost to them by calling 1300 883 788.

What employer superannuation contributions should be included on Payment Summaries for Retirement Scheme members?

Legal advice has been obtained about what employer superannuation contribution amounts should be reported on Payment Summaries for Retirement Scheme members. The four types of contributions considered were:

	Category 1	Member salary sacrifice (pre-tax) contributions of between 1% and 9% for the purchase of benefit points;
	Category 2	Other Member salary sacrifice amounts;
	Category 3	Basic Benefit contributions and Employer contributions relating to Category 1 contributions;

Section 16 - 155(1) (d) of Schedule 1 to the Taxation Administration Act requires the employer to include in the Payment Summary reportable employer super contributions as defined in section 16-182(1).

The section 16-182(1) definition applies to amounts where the amount contributed by the employer is for the individual's benefit and either the individual has the capacity to influence the size of the amount or the way the amount is contributed.

For this reason Category 1 and 2 contributions need to be reported on Payment Summaries as the member has control over the size of the contributions and the way they are contributed.

Category 3 contributions are not reportable as the member has no control over this type of employer payment.

The Defined Benefit Scheme

The same basic principle applies to contributions in the Defined Benefit Scheme however there are a few differences with regard to the contribution categories. The categories in the Defined benefit Scheme are:

	Category 1	Member salary sacrifice (pre-tax) contributions for the purchase of units;
	Category 2	Other Member salary sacrifice amounts;
	Category 3	Basic Benefit and Employer contributions relating to Category 1 contributions.

In the Defined Benefit Scheme Category 1 and 2 contributions need to be reported on Payment Summaries as the member has control over the size of the contributions and the way they are contributed while Category 3 contributions are not reportable as the member has no control over this type of employer payment.

If you require further assistance please contact Employer Services by emailing employerservices@eisuper.com.au or by calling the helpline on 1800 636 441.

Keep us up to date

Please keep us informed about any changes to your employer contact details or about any changes in personnel. We need to keep our contact information up to date (especially for payroll, HR/Finance Managers, and General Managers) so that we can communicate any important information regarding the Scheme or administrative changes efficiently and to the right people. Any updates can be emailed to: employerservices@eisuper.com.au

Investment returns

June quarter 2010 returns for the Contributor Financed Benefit - Retirement Scheme

Strategy	Quarterly Returns
High Growth	-6.5%
Trustee Selection*	-4.9%
Diversified	-4.3%
Balanced	-1.8%
Capital Guarded	0.2%
Cash	1.1%

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.
* Available to Retirement Scheme members only.

June quarter 2010 returns for the Accumulation Scheme

Strategy	Quarterly Returns
High Growth	-5.8%
Diversified	-3.8%
Balanced	-1.5%
Capital Guarded	0.3%
Cash	1.1%

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.

Quarterly Superannuation Guarantee (SG) Contributions

Under the SG requirements all employers must contribute the minimum level of 9% of each eligible employee's earning base in super support for each financial year. The SG contribution is required to be contributed on at least a quarterly basis. From 1 July 2008, your employees' earning base is their ordinary times earnings (OTE).

The following describes the ATO deadlines for employer contributions and the penalties that may apply if employers do not meet them. EISS employers who make monthly contributions in accordance with the Scheme rules will more than satisfy these minimum requirements and will therefore avoid any of the penalties listed.

The ATO imposes penalties if SG contributions are not made by the quarterly cut-off date by applying an SG Charge (SGC)* which is made up of three parts:

• SG shortfall amounts based on ordinary times earnings (OTE).
• Interest on that amount (currently 10% per annum).
• Administration fee of $20 per employee per quarter.

If the SGC and the SGC statement are not submitted by the due date for lodgement additional penalties may apply and these are:

• General Interest Charge (GIC) from the SGC due date will be incurred. GIC compounds daily until SGC and accrued GIC are paid in full. The ATO can reduce the penalty. GIC is tax deductible in the year it is incurred.
• An amendment in the SG legislation, from 24 June 2008, means that if an employer makes an SG contribution to a superannuation fund which is late the employer can elect to have this contribution used to offset against the amount of SG charge they have to pay to the ATO for not meeting their superannuation obligations. Please refer to the ATO website for further information at www.ato.gov.au.
• Penalties may also apply for false or misleading statements, avoidance, failure to provide information or failure to keep SG records.

The following table obtained from the ATO lists the standard cut-off and lodgement dates.

Superannuation Guarantee quarter ended	Cut-off date for Superannuation Guarantee Contributions	Due date for lodgement of a SG statement and payment of the SG charge if contributions are not made on time
1 July - 30 Sept	28 October	28 November
1 Oct - 31 Dec	28 January	28 February
1 Jan - 31 March	28 April	28 May
1 April - 30 June	28 July	28 August

Would you like to see more of us?

As part of our service to you we offer free pre-retirement seminars to your employees, either on your site or at a venue close to you. If you'd like to organise a free seminar for employees, please call 1800 636 441.

Free pre-retirement planning seminars

Pre-retirement seminars are targeted at people who are over 50 years of age and provide information on the following: