FAQ - Frequently Asked Questions

Answers to your commonly asked questions about investment and retirement.

Technical Questions and Answers

• Entitlement to Co-contribution
• I am self employed, am I entitled to receive the Government co-contribution?
• I have not yet received a Co-contribution payment for superannuation contributions that I made in 2007/2008, when will I receive this?
• Can I contribute additional money into my ClearView Pension Plan?
• I am 60 years old, how will I be taxed if I withdraw my superannuation benefits? Does it matter if I take a lump sum or income stream?
• What are the Contribution rules?

Product Questions and Answers

• What are the minimum pension payment percentages for 2009/2010?
• Does ClearView offer contribution splitting?
• Who is an eligible spouse for contribution splitting?
• What contributions are splittable?
• What contributions are not splittable?
• Understanding why 30 June distributions tend to be the largest for growth type unit trusts
• Understanding unit price behaviour following the payment of unit trust distributions
• Why does a unit price drop immediately after a distribution?
• How is the "net earnings" amount that appears on a client’s ClearView Superannuation and Roll-overs, ClearView Pension Plan and ClearView Roll-over Bond statements calculated?
• How is the "return on investments" amount that appears on a client’s ClearView Managed Investments and ClearView Savings Bond statements calculated?

Technical Questions and Answers

1. Entitlement to Co-contribution

I am 65 years of age and earn a total of $30,000 in assessable income from employment each financial year. I do not earn any other income. Am I eligible to receive a co-contribution from the Government?

Provided you make a personal after-tax contribution (also known as a non-concessional contribution) into superannuation before 30 June then you may be eligible for a Government co-contribution if you meet certain criteria (go to www.ato.gov.au for current details).

If your total assessable income# is less than the lower qualifying threshold of $31,920 (2009/2010) you would be eligible for a Government co-contribution equal to 100% of each dollar you contribute up to a maximum co-contribution of $1,000.

Important Note:

The May 2009 Federal Budget proposed adjustments to the calculation of Government Co-contribution payments from 1 July 2009. This proposal has been legislated.

The table below shows the maximum co-contribution payments, matching rates and reduction in cents per dollar amounts:

For example, the co-contribution rate for the 2009/2010 financial year will be $1 for each personal contribution made by you (i.e. matching rate of 100%) to a maximum of $1,000, reducing by 3.333 cents for every dollar by which your total income exceeds the lower qualifying threshold.

#Total assessable income includes: Assessable Income plus Reportable Fringe Benefits and Reportable Employer Superannuation Contributions. If running a business, gross income less business deductions is assessed.

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2. I am self employed, am I entitled to receive the Government Co-contribution?

Yes, since 1 July 2007, the Government Co-contribution has been extended to include self-employed, provided they meet the following criteria:

• Make a personal after-tax contribution (which a tax deduction is not claimed) into a superannuation fund;
• Receive at least 10% of total income* from carrying on a business (self-employed) or salary/wages;
• Have less than $61,920 in total assessable income^;
• Are under age 71 at the end of the relevant financial year;
• Not hold an eligible temporary resident visa at any time during the income year; and
• Lodge a tax return.

*Total income for the 10% rule includes: Assessable Income plus Reportable Fringe Benefits and Reportable Employer Superannuation Contributions. If running a business, gross income (before expenses) is assessed.

^Income threshold for co-contribution amount includes: Assessable Income plus Reportable Fringe Benefits and Reportable Employer Superannuation Contributions. If running a business, net income (after expenses) is assessed .

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3. I have not yet received a Co-contribution payment for superannuation contributions that I made in 2007/2008, when will I receive this?

The Australian Taxation Office (ATO) have advised that around 200,000 super co-contribution payments, in respect of the 2007/2008 financial year, will not be made by the ATO to superannuation funds before the end of the 2008/2009 financial year, due to problems with ATO systems.

If you are suffering hardship as a result of these delayed payments you should contact the ATO on 1300 139 027 to discuss your circumstances. For more information, go to www.ato.gov.au and search for 'Super co-contributions'.

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4. Can I contribute additional money into my ClearView Pension Plan?

Unfortunately, you cannot add any further money to a superannuation pension once it has begun.

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5. I am 60 years old, how will I be taxed if I withdraw my superannuation benefits? Does it matter if I take a lump sum or income stream?

Once you are aged 60 and over all withdrawals from a taxed superannuation fund (the ClearView Retirement Plan is a taxed superannuation fund) will be tax-free. This means that it will be tax-free to you whether you withdraw the benefits as a lump sum or as an income stream.

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6. What are the Contribution rules?

If you are thinking of making contributions into your superannuation fund, you should be aware of the rules and the contribution caps (or limits).

In order to contribute to superannuation you need to be first eligible to contribute. Those eligible include:

• Persons aged under 65 and
• Persons aged 65 to 74 who have met the work test (i.e. have worked 40 hours in 30 consecutive days).

There are two types of contributions that can be made into superannuation these are:

• Concessional contributions and
• Non-concessional contributions.

Concessional Contributions

Concessional contributions are superannuation contributions made from before-tax income. Concessional contributions include your employer Superannuation Guarantee contributions, additional employer contributions, salary sacrifice contributions and contributions made by the self-employed for which they claim a tax deduction. These contributions are taxed at 15% within the fund.

The Concessional Contribution Cap for 2009/2010 is $25,000 per person per annum. If you are 50 years old or are turning 50 before 30 June 2012, you may take advantage of the transitional arrangements. Between the financial years of 2009/10 and 2011/12, concessional contributions will be limited to $50,000 per annum for people who are at least 50 years old in the year the contribution is made.

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Non-Concessional Contributions

Non-concessional contributions are contributions made from a person’s after-tax income. The terms ‘non-concessional contributions’, ‘post-tax contributions’ and ‘after-tax contributions’ are often used interchangeably. These were previously known as Undeducted Contributions.

If you are under 65 years old, you will be able to contribute up to $150,000 per financial year or $450,000 if averaged over 3 years (i.e. you can bring forward your contribution limits from the next two financial years).

If you are 65 to 74 years old, you will be able to contribute up to $150,000 per financial year (no ability to bring forward contribution limits from future years) if you meet the work test.

If you are under 65 and take full advantage of the averaging described above (i.e. contribute $450,000 in one financial year), this means that you won’t be able to make contribution in the two financial years following the year in which the contributions are made.

Non-concessional contributions below the cap will not be taxed and will be tax-free when withdrawn from superannuation. The earnings on non-concessional contributions, are taxed concessionally at 15% in a superannuation fund.

Please note that if you exceed either of the contribution caps mentioned above, the contributions in excess of the cap will be taxed at the top marginal rate plus Medicare levy (46.5%). The ATO will assess your tax liability on excess contributions. You will receive a letter stating your tax liability arising from the excess contribution.

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Product Questions and Answers

1. What are the minimum pension payment percentages for 2009/2010?

The May 2009 Federal Budget proposed a 50% reduction to the 2009/2010 financial year annual minimum pension payment requirements. This proposal became law on 4 June 2009.

The minimum pension percentages changes are shown in the table below.

Note:

I. Calculated as a percentage of your opening account balance on 1 July 2009 or prorated at the start date for accounts opened in the financial year 2009/2010.

II. Ease into retirement accounts (account numbers beginning with ‘79’) are restricted to receiving a maximum pension payment of 10% of the opening balance on 1 July 2009 or start date of the account opened in the financial year 2009/2010.

• ClearView Pension Plan clients who have selected a 'Minimum' pension payment will receive reduced pension payment/s for 2009/2010, reflecting the 2009/10 minimum pension percentages.
• ClearView Pension Plan clients who have selected a 'Specific amount' to be paid as a pension payment will continue to receive that amount.

Clients can provide pension variation instructions to either increase or decrease their pension payments by calling us on 132 977 or completing a Variation Form. We must receive your request by the 5th day of the month for the variation to be processed for the current month.

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2. Does ClearView offer contribution splitting?

Yes, members in the Superannuation and Roll-overs Division of the ClearView Retirement Plan may apply to the Trustee to 'split' 'eligible contributions' with an 'eligible spouse'.

Contribution splitting applies to eligible contributions made within each financial year. The ability to split contributions is subject to any legislative requirements and conditions imposed by the Trustee. The Trustee reserves the right to change any conditions in relation to the contributions splitting.

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3. Who is an eligible spouse for contribution splitting?

An 'eligible spouse' of a Member is the Member's spouse (including de facto spouse or same sex partner).

Please note that same-sex partners are eligible for splitting contributions made in the 2008/09 financial year onwards.

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4. What contributions are splittable?

Contributions may be split on the following basis:

• 85% of Taxed contributions, provided this is not more than the concessional contributions cap of $25,000 (or $50,000 if you are over 50 in the period up to 30 June 2012).

Taxed contributions are generally:

• contributions paid by an employer (including Superannuation Guarantee, additional employer, and salary sacrifice contributions) and
• personal contributions for which an income tax deduction has been claimed.

If you are eligible to claim a tax deduction for personal contributions you make, you must provide a Section 290-170 notice prior to or at the time of your contribution splitting application. Otherwise you will not be able to claim a tax deduction in respect of the relevant contributions.

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5. What contributions are not splittable?

The following contributions are not splittable:

• Personal after-tax (i.e. non-concessional) contributions;
• If your benefit is subject to a family law payment split;
• The relevant contributions have been transferred or rolled over to a superannuation fund (this includes overseas superannuation benefits);
• The relevant contributions have already been subject to an application to contribution split;
• The relevant contributions were made to a defined benefit plan; and
• At the date your application to split contributions is received by the Trustee your 'eligible spouse' is 65 years or older, or is aged between their relevant preservation age and 65 years, and is retired.

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6. Understanding why 30 June distributions tend to be the largest for growth type unit trusts

It is common industry practice for net capital gains to only be distributed as part of the 30 June distribution each year. For all other distributions during the financial year, only interest and dividend income is distributed. This is why the 30 June distribution is usually the largest distribution for the financial year.

During the financial year, any net realised capital gains received by the fund are factored into the unit price until such time that they are distributed to unitholders.

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7. Understanding unit price behaviour following the payment of unit trust distributions

How is a unit price calculated?

Each day, the unit price is calculated by taking the net market value of the assets of the investment option, and dividing it by the number of units on issue within that investment option.

Example

For example, if the net market value of assets for an investment option was $5,612,254 and the number of units on issue were 4,875,214, the unit price would be calculated as follows:

$5,612,254/4,875,214 = $1.1512

What is included within the net market value?

• Income received from the underlying investments, but not yet distributed to unitholders.
• Net realised capital gains received from the underlying investments, but not yet distributed to clients.
• The value of the underlying investments.
• A deduction for the management fee charged for the investment option.

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8. Why does a unit price drop immediately after a distribution?

As the unit price during a distribution period includes any accrued income and net capital gains that have been received but not yet paid out, when they are paid out at the end of a distribution period, this will have an immediate impact on the unit price.

Example 1

Using the values of the example above, where the net market value of assets was $5,612,254, we will look at the impact on the unit price if a distribution amount of $456,897 was paid to unitholders. For simplicity, we will assume that the market returned 0% for the first day of the next distribution period. The unit price for the first day of the distribution period would be calculated as follows:

($5,612,254 - $456,897)/4,875,214 = $1.0575

Example 2

Another way of looking at this is to see what the distribution amount of $456,897 equates to as a cents per unit figure.

$456,897 / 4,875,214 x 100 = 9.3718 cents per unit

If you take the unit price for the last day of the distribution period (i.e. $1.1512) and subtract from it the cents per unit figure (i.e. 9.3718), you will obtain a figure of $1.0575. As you can see, this unit price is the same as that calculated in Example 2.

$1.1512 - $0.093718 = $1.0575

Consequently, the unit price for the first day of the new distribution period is calculated as follows:

Unit price for the last day of the previous distribution period; less
The amount distributed for that distribution period, i.e. the cents per unit; plus
Any market movements on the first day of the new distribution period.

In the above worked examples, we assumed a 0% market movement for simplicity.

The unit price for the first day of the new distribution period will be lower than that for the last day of the previous distribution period where the market movements for the first day of the new distribution period are less than the amount being distributed.

Conversely, the unit price for the first day of the new distribution period will be higher than that for the last day of the previous distribution period where the market movements for the first day of the new distribution period is greater than the amount being distributed.

Example 3

The cash distribution amount received by the unitholder (which they may then elect to reinvest) is calculated using the following formula:

(Closing unit balance at the end of the distribution period) x (cents per unit) / 100 = Cash distribution amount

Therefore, for a client with 9,735.1245 units at the end of a distribution period, the cash distribution amount that they would receive, based on a cents per unit amount of 9.3718 would be:

9,735.1245 x 9.3718 / 100 = $912.36

The only instances where a unitholder would not receive the cash distribution amount as calculated above, would be where they were subject to withholding tax on their distribution payment, i.e. TFN withholding, non-resident withholding or under 18 withholding.

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9. How is the "net earnings" amount that appears on a client’s ClearView Superannuation and Roll-overs, ClearView Pension Plan and ClearView Roll-over Bond statements calculated ?

The “net earnings” calculation is as follows:

Net earnings = Closing Balance - Opening Balance - Inflows + Outflows

In terms of the above formula, some examples of transactions considered “inflows” are:

• Contributions
• Roll-over In
• Switch In

In terms of the above formula, some examples of transactions considered “outflows” are:

• Redemptions
• Roll-over Out
• Switch Out
• Contributions Tax
• Pension Payment
• Insurance Premiums

Example of the "net earnings" calculation

Based on the above, the "net earnings" is calculated as follows:

Net earnings = B - A - (C + D) + (E + F)

Net earnings = $30,000 - $10,000 - ($15,000 + $500) + ($3,000 + $500)

= $8,000

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10. How is the "return on investment" amount that appears on a client’s ClearView Managed Investments and ClearView Savings Bond statements calculated ?

The “return on investment” calculation is as follows:

Return on investment = Closing Balance - Opening Balance - Inflows + Outflows

In terms of the above formula, some examples of transactions considered “inflows” are:

• Investments
• Switch In
• Transfer In
• Transmission In
• Distributions Reinvested

In terms of the above formula, some examples of transactions considered “outflows” are:

• Redemptions
• Switch Out
• Transfer Out
• Transmission Out
• Distributions Paid

Special Rules For The ClearView Managed Investments

1. Distributions paid with an effective date equal to the Closing Balance date are excluded from the calculation, as this amount is already built into the Closing Balance amount. For example, if the Closing Balance on the statement was as at 30 June 2009, any distributions effective 30 June 2009 would be excluded.
2. Distributions paid with an effective date equal to the ‘Opening Balance less one day’ are included in the calculation. This is because these amounts were excluded in the calculation for the previous period. As this distribution would not appear on the statement showing the ‘return on investment’ amount, this may prove confusing for investors trying to calculate the figure shown. For example, if the Opening Balance on the statement was as at 1 July 2008, then any distributions effective 30 June 2008 need to be treated as an outflow.

Example of the "return on investment" calculation

Based on the above, the "return on investment" (ROI) is calculated as follows:

ROI = B - A - (C + E + G + I + K) + (M + D + F + H + J)

ROI = $45,000 - $20,000 - ($15,000 + $2,500 + $150 + $220 + $404) + ($3,000 + $2,500 + $150 + $220 + $404)

= $13,000

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