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Accounting Law - Assignment Example

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The important facts at hand to consider are: Jonathan’s age is 57 years old; his superannuation fund balance is $700,000; that amount is made of the following components: $140,000 voluntary after-tax contribution of Jonathan …
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Accounting Law
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Download file to see previous pages The Superannuation Industry (Supervision) Regulations 1994 – Schedule 1 provides for the conditions of release of the superannuation funds under Part I, sections 101 to 114 thereof, namely: retirement; death; terminal medical condition; permanent incapacity; former temporary resident under certain conditions; payment to the Commissioner of Taxation under the Superannuation (Unclaimed Money and Lost Members) Act 1999; termination of employment on or after July 1, 1997 where the member’s fund does not amount to more than $200; severe financial hardship; attainment of age 65; compassionate grounds; termination of employment with an employer who contributed to the funds for the member; temporary incapacity; attainment of preservation age; a found lost member with fund balance amounting to less than $200; certain conditions under the Income Tax Assessment Act 1997; under s 292-B of the Income Tax (Transitional Provisions) Act 1997, and; so provided as release conditions under §62(1) (b) (v) of the 1994 Act. In the problem at hand, Jonathan’s primary condition for release of his superannuation fund balance is retirement, which is further defined as a state when the person under gainful employment of another is set to terminate that employment and will never again seek employment either on a full or part time basis. 1 In addition, that employee contemplating retirement must have reached the age of 60 or if below 60, must have reached his or her preservation age, according to s. 7 of the same Act. The problem does not state, however, if Jonathan has reached his preservation age, a condition assumed if a person is born under the following dates: before 1 July 1960 to 30 June 1961, if 55 years of age; between 1 July 1960 to 30 June 1961, if 56 years of age; between 1 July 1960 to 30 June 1962, if 57 years of age; between 1 July 1962 to 30 June 1963, if 58 years of age; between 1 July 1963 to 30 June 1964, if 59 years of age, or; after 30 June 1964, if 60 years of age.2 Fig. 1 Superannuation Interest Tax3 Thus, for Jonathan to be able to able to access his superannuation fund balance, he must have been born between 1 July 1960 to 30 June 1962, since he is now 57 years of age, otherwise he will not be able to access the same on the ground of retirement. Assuming he was born between that period, Jonathan can lawfully access his fund and the tax due on the benefit from the superannuation fund depends on the following factors: age; whether as lump sum or income stream, and; the taxed or untaxed elements present in the fund.4 Figure 1 above illustrates how taxes of superannuation benefits are determined. A superannuation benefit, according to the diagram, may have components, which according to s. 307.120 of the Income Tax Assessment Act 1997 (ITAA 97 hereafter), may be a taxable or tax-free component. Superannuation income streams paid on or after 1 July 2007 have tax free components that are usually the “crystallised segment and the contributions” while the taxable component is the amount of the income stream benefit minus its tax free component. A superannuation income stream as a “regular series of payments: made directly from accumulated superannuation contributions or purchased with a lump sum” (Guide to Social Security Law 2011) while the ITAA Regulations define it as: “an annuity for the purposes of the SIS Act in accordance with the subregulation 1.05 (1) of the SIS Regulations; or a pension for the purposes of the SIS Act in accordance with subregulation 1.06 (1) of the SIS Regulations; or a pension for the purposes of the RSA Act in accordance with regulation 1.07 of the RSA Regulations.” In addition, it is also “an annuity or pension within the meaning of the SIS Act; and commenced after 1 September ...Download file to see next pagesRead More
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