Ask Noel

Each week, financial adviser and international best-selling author Noel Whittaker answers your questions.

When I started my new job just over a year ago, I was told the employer would pay me "the maximum employer superannuation contribution", which I now discover represented roughly 6.8 per cent of my base salary, not 9 per cent. Is there any other reason — or loophole — by which they would not have to pay the 9 per cent contribution? They are paying a total of $16,470 a year in super for me.

The law does require a contribution of 9 per cent from employers but the maximum they are compelled to make is currently 9 per cent of $183,000 - this is the $16,470 a year they are paying. You do have the option of reducing your take-home pay and increasing your total concessional super to $25,000 a year. Only you can decide if that is appropriate, given your age and assets.

I am getting dividends from a foreign private company that pays tax in its country of residence. In that country, dividends are tax free in the hands of the recipient and they also do not have a non-resident's tax on dividends. Could you tell me how those dividends will be taxed in Australia?

As an Australian resident, you are taxed on income from all sources. The dividends will have to be included as foreign income and, as no tax has been paid there, there would be no foreign-tax credit allowed.

I am 36 and working in Australia for my British employer on a 457 visa. I have been here more than two years and have applied for permanent residency. I have $190,000 in my British employer- sponsored super fund and want to transfer this to my Australian employer-sponsored super fund. I currently contribute up to the $25,000 concessional cap via my 9 per cent and salary sacrifice. I have been told any transfer from my British super fund to an Australian super fund would attract 15 per cent tax on entry to a fund here, and would form part of the $25,000 concessional cap contribution. Any excess would form part of the $150,000 non-concessional cap, which would also be taxed at 15 per cent. Is there a way to bring over these funds without tax, either by paying into an Australian super fund or by gaining access to the funds myself?

This is incorrect. None of the amount transferred from a British pension scheme would count towards an individual's concessional contribution cap. The growth component (that is, difference between the value of the fund at transfer and when you first became an Australian tax resident) is taxable in Australia. The tax is either at your marginal tax rate, or you can elect to have it taxed at the super fund rate of 15 per cent. The portion of the transfer amount that is not taxable will count towards your non-concessional contribution cap of $150,000 (potentially up to $450,000, subject to the bring-forward rule). You cannot avoid paying tax on the growth component. Also, you can't gain access to the funds as they must be transferred into an Australian Qualifying Recognised Overseas Super Scheme recognised by the British HMRC - otherwise you'll be liable for excessive penalty tax from the British side.

In what situation can you earn interest from cash in the bank and not pay tax on the interest? In a recent column, I read, "I'm not paying tax at present. My concern is that the government will change laws so that I will be required to start paying tax on interest earned on cash in the bank." How can this be possible?

A person eligible for the low-income tax offset (LITO) may earn up to $20,542 in taxable income without paying tax. A person eligible for the seniors and pensioners tax offset (SAPTO) may earn up to $32,279 in income without paying tax - the figure is $28,974 a year for each member of a couple.



The explainer

Age is no barrier to prudent planning

My husband and I are 74 and 72 . We rely on bank interest for our income with a part pension. We have about $400,000 in savings and with diminishing interest rates, would it be advantageous to invest some of that in blue-chip shares? I have heard you speak of share trusts. Would they be suitable at our age?

You may well have 20 years or more ahead of you, so it would be prudent to have at least part of your assets in growth investments such as shares. If you have no experience with shares, you are probably best with managed funds. The choice is really between low-cost index funds that simply track the index, or actively managed funds run by professionals who make the decisions about buying and selling. A good adviser will be able to help you choose a fund that suits your goals and risk profile.

noelwhit@gmail.com.