We have received the following updated information from the Australian Taxation Office regarding the 2018 PAYG payment summary.
The changes to the information on the 2018 PAYG payment summary came about following the changes from 1 July 2017 to the way capped defined benefit income streams are taxed as a result of the introduction of the $1.6 million Transfer Balance Cap and the associated defined benefit income cap.
Many of the pensions paid by the Commonwealth Superannuation Corporation (CSC) are capped defined benefit income streams.
The taxation of these income streams has changed if:
- you are 60 years of age or older, or under 60 and in receipt of a death benefit income stream where the deceased was 60 or over at the time of death; and
- the total income you receive from all of these income streams is in excess of your defined benefit income cap for the year.
Generally your defined benefit income cap for 2017/18 will be $100,000, although this may be reduced in some circumstances, including if you turn 60 during the year or you were over 60 and started to receive income from a capped defined benefit income stream for the first time during that year.
If your income from all of your capped defined benefit income streams exceeds your defined benefit income cap you may:
- need to include more of your pension income in your assessable income; and/or
- have a reduced entitlement to the tax offset on the untaxed element of your pension.
Superannuation funds no longer pre-populate payment summaries with your entitlement to the tax offset on your untaxed element as they don’t know if you have other income streams from other funds which will affect your entitlement to the offset. Your entitlement to the offset will need to be determined as part of lodging your income tax return.
myTax allows you to prepare your tax return using an integrated tool that prefills all of your payment summaries and provides a two click solution to ensure that you include the correct income and offset in your income tax return.
A stand-alone version of the tool that can be used at any time is available here or can be found by going to ato.gov.au and typing QC 55642 in the search box.
The instructions for the paper return were also updated for the 2017/2018 year. A PDF of the instructions is available at Individual tax return instructions 2018 PDF. The guidance to help you understand if you need to include additional pension income in your return are on pages 15 and 16 and the guidance to help you calculate your entitlement to the offset is on page 41.
There are certain circumstances where your defined benefit income cap is reduced and the calculation of your additional assessable income and tax offset becomes more complex.
The ATO encourages you to use the stand-alone version of the tool or myTax if you received income from a capped defined benefit income stream and
- turned 60 during 2017-18; or
- were 60 years or older for the year but started to receive a capped defined benefit income stream for the first time during the year; or
- were 59 years or younger and their your capped defined benefit income stream was a death benefit income stream where the deceased member was 60 or over at the time of death.
If you are lodging a paper return you will need to go here for more detailed assistance in completing their return. You can also find these more detailed instructions by going to ato.gov.au and typing QC 54665 in the search box.
Please note, the following message in the August 2018 issue of SuperTime, “Your tax offset amount has already been reported to the ATO and is not included in your statement. The offset will still be applied to your pension, but now the ATO will calculate your offset and ensure that you still enjoy its benefits” was incorrect. As explained in the above, CSC was not required to report your offset to the ATO and did not do so.
This information has now been updated on the CSC website here https://www.csc.gov.au/Members/News/Changes-to-your-2018-PAYG-pension-summary/
If your only capped defined benefit income stream is from CSC and the income you received is less than your defined benefit income cap, you will still be entitled to a 10% offset on your untaxed element.
- use myTax, the offset amount will be calculated for you by the integrated tool using payment summary information reported to us;
- lodge a paper return, you will need to calculate and report this information to us in line with the instructions for the paper form.
If you need to lodge an amended tax return, the process for amending your tax return can be found here. You can also find the instructions by going to ato.gov.au and entering QC 54207 in the search box.
Transfer balance account details available on myGov
The ATO also informed SCOA that you can now go on line to look at your transfer balance cap information. The information available includes the current balance of your transfer balance account as well as details of each event that has been reported to and processed by the ATO that make up your transfer balance account.
This is particularly important for individuals who may have a capped defined benefit income stream and who are considering starting an account based pension, including a death benefit income stream, and want to make sure they don’t exceed their transfer balance cap. Individuals can print the information or download it and email it to their advisor.
Click here to see some screen shots which illustrate the type of transfer balance account information individuals are able to see on line for your information.
We hope this information is of assistance. If you still have some questions, please call National Office on 02 6286 7977.