Money: New penalty regime has plenty of handy loopholes

TAXING SUPER


* Employer contributions to super schemes are taxed at 33%.

* Your own contributions are made from income which has already been taxed, at your personal rate.

* Super scheme earnings are taxed at 33%.

* Withdrawals are generally tax-free.

THE NEW 5% PENALTY TAX:


* Applies only if you earn $60,000-plus (before tax).

* Applies to withdrawals of employer contributions and the earnings on them (your own contributions and the earnings on them can still be withdrawn tax-free).

* Is charged on employer contributions made since April 1 this year, but only if those contributions have risen since then.

However, the penalty does not apply if that increase resulted from a contract that existed before April 1, or if the contributions have not increased as a percentage of your total pay.

YOU DON'T PAY THE PENALTY IF:


* You leave the job, die, are disabled, retire or partially retire (the penalty may apply if you leave a job within two years, or if your employer's super contributions have risen by more than 50% in the two years before leaving).

* You are suffering "significant financial hardship."

* You need to withdraw super savings to divide matrimonial property.

* You use your super to buy an annuity lasting 10 years or more.

* Your scheme pays a defined benefit.

* You transfer to another super scheme.

* Your earnings fall below $60,000. If that is the case for the four years before you withdraw your super, you avoid the 5% penalty completely. If your pay is under $60,000 for a lesser period the penalty will be reduced.

* This is a summary of the rules - seek expert advice before taking action.