Super contributions on the way up (hopefully)

Q If an employer fails to comply with the super guarantee rules and a penalty is applied, where does the extra money go?

AThe administration charge of $20 an employee, when an employer does not meet superannuation guarantee responsibilities, is retained by the Australian Taxation Office. The interest charge is forwarded to the employee's superannuation fund.

QMy student daughter did some holiday work that ended with her having $540 in Hostplus. She has no intention of resuming part-time/holiday work in hospitality. A recent super statement showed earnings of $1.42 and charges of $74. The $74 in fees on a $540 account seems expensive. Is it possible to have accounts paid out that are inactive, going backwards and involve small amounts?

AA member can access their superannuation when they have not reached retirement age if the benefit is less than $200. The fees levied by your daughter's fund do not appear excessive but should not have exceeded the income earned by the fund. There is protection in the super regulations for accounts with less than $1000. Under these a super fund cannot charge an administration fee that exceeds income earned.

In addition to an administration fee, an account can also fall because of tax payable on employer contributions and because of insurance premiums. Your daughter should check to see if insurance is part of her account and, if she doesn't want it and the fund to go backwards, request its removal.

QI am 73 and have a self-managed super fund and about $400,000 in an industry super fund. The SMSF is in pension mode while the industry fund is still in accumulation mode.

As the returns on the SMSF are considerably better than those from the industry fund, I am considering rolling the latter into my SMSF. If I do, do the proceeds of the industry fund automatically have to go into pension mode, or can it can remain in accumulation mode?

AIf you rolled over the balance in the industry fund into your SMSF it would not automatically go into pension phase. Instead, it would go into an accumulation account in the fund. It would make sense to set up a new bank account that the proceeds of the rollover would be banked into.

By keeping the rollover funds in the accumulation account, you would not be forced to pay a minimum pension that could exceed the income earned by the investments of the funds. The downside of not having the rollover funds in pension phase is the tax payable on the income earned by investments allocated to the accumulation account.

Questions can be emailed to super@taxbiz.com.au

Max Newnham's book, Funding your Retirement A Survival Guide, is available in bookstores and as an e-book.