The surcharge is a tax on surchargeable contributions and applies if your adjusted taxable income exceeds the surcharge lower income amount set out in the tax laws. The surcharge will not apply for the 2005-06 and later financial years, but will apply to surchargeable contributions for earlier financial years, including the 2004-05 financial year if your adjusted taxable income exceeds the relevant lower income amount for the particular year.
For most Members, adjusted taxable income is usually your taxable income plus your surchargeable contributions.
In MilitarySuper, your surchargeable contributions are made up of employer productivity contributions and the contributions notionally paid by your employer in a financial year. These details are required to be reported annually by MilitarySuper to the Australian Taxation Office (ATO).
The ATO matches this information with taxation records and determines the surcharge liability of Members. The ATO will then calculate the surcharge payable and send a surcharge assessment to the MSB Board. The ATO will also advise you that it has sent the assessment to your trustee.
If you receive notification of a surcharge assessment in respect of your MilitarySuper surchargeable contributions for a financial year, your options are to either:
- pay nothing and have it deducted from your MilitarySuper benefit before it is paid, or
- pay some or all of the debt to MilitarySuper at any time before your MilitarySuper benefit becomes payable.
The surcharge law requires us to continue to maintain a surcharge debt account for each member to record any surcharge assessments advised by the ATO, together with any payments you make and any interest required to be imposed. Your annual MilitarySuper Member statement provides details of this account.
Any debit balance in your surcharge debt account on 30 June each year will be charged a full year's interest at the prevailing 10-year Treasury bond rate. The legislation requires that interest continue to be imposed on any amount in the surcharge debt account at 30 June in any year even though surcharge has been abolished from 1 July 2005.
The ATO may issue an amended surcharge assessment at any time. We can only update our records when we are notified of any changes by the ATO.
Payment of the surcharge debt
Any surcharge debt can be paid in part or full progressively during your period of membership, or left to accrue with interest at the 10-year Treasury bond rate. Any surcharge debt remaining when a benefit becomes payable, whether in cash or by transfer/rollover to another Fund, will be deducted from the MilitarySuper benefit payable.
When the benefit becomes payable you can request that the debt be deducted from:
- the employer lump sum benefit before it is paid as a lump sum or converted to pension; or
- the pension benefit after conversion of the employer lump sum to pension; or
- the Member Benefit before it is paid as a lump sum.
If you wish to make a payment, in part or in full, it should be sent directly to MilitarySuper with a DFRDB and MilitarySuper member contributions surcharge remittance advice form [PDF 802 KB]. This form should also be available from your pay office.
Alternatively, you can attach to the payment a note that clearly states your full name, address, service number, scheme membership (MilitarySuper), and that the payment is to be credited to your surcharge account.
If a surcharge debt is to be paid from a MilitarySuper benefit and a Member elects for a lump sum only benefit, or where pension is payable and a Member elects to have the debt applied to the lump sum instead of the indexed pension, the lump sum is reduced by the surcharge debt amount recorded at the time the benefit is determined.
Disagreement with assessment
If you disagree with a surcharge assessment, in so far as it is based on adjusted taxable income, you may lodge a formal objection with the ATO.
If the disagreement relates to the calculation of the amount of surchargeable contributions, a request for reconsideration may be made to Commonwealth Superannuation Corporation (trustee of MilitarySuper).
A request for reconsideration would need to be based on material facts. For example, you would need to demonstrate that the calculation of surchargeable contributions was not in accordance with the provisions of the Superannuation contributions tax (Assessment and Collection) Act 1997, or you disagree with the data used to calculate surchargeable contributions, such as the salary, age, or membership period.
If still dissatisfied after reconsideration by your trustee, a complaint may be lodged with the Superannuation Complaints Tribunal (SCT).