Ancillary contributions
If you are a current DFRDB contributor you may also choose to make voluntary superannuation contributions to MilitarySuper.
With effect from 1 August 2005, the MilitarySuper rules were changed to allow for a range of voluntary ancillary contributions to be made into MilitarySuper by DFRDB contributors.
Should you choose to make voluntary ancillary contributions to MilitarySuper, you do not become a Member of MilitarySuper. You do, however, become entitled to an Associate benefit in MilitarySuper.
What are ancillary contributions?
The term ‘ancillary contributions’ describes a range of voluntary contributions or transfers you can make to MilitarySuper for yourself or on behalf of your spouse. When they become payable they do not form part of the DFRDB benefit. There are five types of ancillary contributions offered by MilitarySuper. These five types are:
- Additional personal contributions
- Salary sacrifice
- Transfer amounts
- Spouse contributions
- Co-contributionsTop
Who can make ancillary contributions?
To be eligible to make ancillary contributions you must be a contributing DFRDB Member.
New rules apply to the use of Tax File Numbers. MilitarySuper cannot accept some ancillary contributions if they do not have your Tax File Number.
Contribution limits
There is a limit on the amount of personal Member contributions (called ‘non-concessional contributions’ because they have been paid from after-tax earnings and you have not been able to claim a tax deduction on them) you can pay into your superannuation without incurring additional tax.
The limit across all your superannuation funds is either:
- maximum $150 000 per year or
- maximum $450 000 over 3 years for Members under 65.
Industry-wide taxation rules permit you to pay the full amount of $450 000 in one year and not contribute in the following two years. Any personal contributions made over the limits will be taxed at the top marginal tax rate (plus Medicare levy) by the Australian Tax Office (ATO) on an annual basis. The limits will be indexed periodically.Top
Tax file numbers
New rules apply to the use of Tax File Numbers. MilitarySuper cannot accept your personal Member ancillary contributions if ComSuper does not have your Tax File Number. This will also include any spouse contributions you may make, if MilitarySuper does not hold your spouse’s Tax File Number.
1. Additional personal contributions
Additional personal contributions are contributions you can make voluntarily, in addition to your regular DFRDB contributions. There is a limit on the amount of personal contributions you can pay into your superannuation without incurring additional tax.
No tax is payable on these contributions on entry to the Fund, as those contributions are paid from your after tax salary.Top
2. Salary sacrifice
Salary sacrifice contributions are contributions from your pre-tax salary that you can make voluntarily, in addition to your regular contributions to DFRDB. Those contributions cannot be made instead of your regular DFRDB contributions. As these are organised through Defence, you will need to contact your SmartSalary in order to start or stop salary sacrifice deductions.
There is also a limit on the amount of concessional contributions you can pay into your superannuation without incurring additional tax. Concessional contributions include salary sacrifice amounts and employer contributions on which the employer is able to claim a tax deduction. The limit across all your superannuation funds is:
- maximum $50 000 per year or
- a transitional limit of $100 000 per year for five years (2007-08 to 2011-12) for Members over age 50 on or after 1 July 2007.
Concessional contributions above the caps will be taxed at the top marginal tax rate (plus Medicare levy). Concessional contributions above the concessional contributions caps will be counted towards your non-concessional contributions cap.
15% tax is deducted from these contributions on receipt.Top
3. Transfer amounts
You can transfer benefits accrued from any of the following institutions to MilitarySuper:
- another regulated superannuation Fund
- a Retirement Savings Account
- an Approved Deposit Fund or
- the Special Account (previously called the Superannuation Holding Account Reserve (SHAR)).
You cannot transfer a DFRDB benefit into the MilitarySuper Fund as the DFRDB scheme is not a regulated superannuation Fund.
15% tax is deducted from any untaxed portion of the transfer amount on receipt.
Amounts transferred into MilitarySuper from other superannuation funds will not count towards the contribution caps. (The transferring fund will withhold tax at the top marginal tax rate for amounts over $1 million).Top
4. Spouse contributions
Spouse contributions are contributions you can make to MilitarySuper for your spouse. Your spouse will become an associate Member of MilitarySuper and his or her contributions will be kept in a separate account.
To be eligible to receive spouse contributions, your spouse must be a person of the opposite sex who shares a marital relationship with you. A marital relationship exists if you have been living together as husband and wife on a permanent and bona fide domestic basis for a continuous period of at least three years. If the period is less than three years, MilitarySuper will need to consider evidence to determine if spouse contributions can be received. This includes, but is not limited to, evidence establishing any of the following:
- your spouse is wholly or substantially dependent on you
- you are legally married
- you have a child born of the relationship or adopted during the relationship or
- you jointly own a home which is your usual residence.
Once you have made these contributions, the benefit belongs to your spouse and will be payable to him or her. You no longer have any right to this benefit. This benefit will be payable as a lump sum only, rather than as a pension.
Your spouse will also be able to choose any of the investment strategies and switch between options at any time.
No tax is payable on these contributions on entry to the fund as these contributions are paid from your after tax salary.
You and your spouse need to be aware of the contribution limits.Top
5. Co-contributions
Co-contributions are an additional contributions from the Australian Government for eligible individuals.
If your assessable income and fringe benefits are less than the limit imposed by the government you are entitled to receive a co-contribution using information from DFRDB and your tax return.
If you are an eligible recipient of a co-contribution and you are in the DFRDB, the co-contribution will be paid into MilitarySuper.
Government co-contributions will not be included in the contribution caps and will be tax free when you withdraw your benefit.
No tax is payable on these contributions on entry to the Fund.
Investment choice
Your ancillary contributions plus investment returns make up your Ancillary Benefit. MilitarySuper offers a range of investment strategies in which you can choose how to invest your Ancillary Benefit (including any co-contributions).
At the time of preparing this document the investment strategies for your Ancillary Benefit were as shown in the following diagram:
Top
MilitarySuper investment strategies
If you do not make a choice of investment strategy for your Ancillary Benefit, it is invested in the default strategy. None of the investment strategies offered are capital guaranteed. Any investment activity carries with it an inherent risk and as a result, investment performance will fluctuate in line with the markets in which the fund is invested. It is therefore possible for investment returns to be negative from time to time and as a consequence, the value of your ancillary component will rise and fall. In these circumstances it is possible that if you leave the fund within a few years, your ancillary component might be less than the amount you have contributed because of the level of investment earnings. However, the reverse also applies when investment returns are positive.
You can choose one investment strategy or a combination of strategies. If no choice is made, ancillary contributions are invested in the default Growth strategy.
You can switch between options at any time, free of charge. The trustees may introduce a fee to switch investment options in the future. If such a fee is to be introduced, you or your spouse, will be notified in advance.
Important: Before making an investment choice you should read the MilitarySuper publication Your guide to investment choice, which forms part of the Product Disclosure Statement (PDS) for MilitarySuper. If you do not already have a copy you can obtain one from the MilitarySuper website www.militarysuper.gov.au or by calling 1300 006 727.
Tracking investment performance
Contributions you pay to MilitarySuper purchase units at the price for the investment strategy in which your Ancillary Benefit is invested on the day the contributions are received. Thereafter, the value of those contributions is equal to the number of units purchased, multiplied by the relevant unit price for the day on which the valuation is made.
Daily unit prices for all of the investment strategies offered are published on the MilitarySuper website.
For more information on how unit prices are determined and how your contributions are invested, please refer to the MilitarySuper PDS. Your annual Ancillary Member Statement also explains how your benefits are valued.Top
Family Law and Ancillary Benefits
Currently, the legislation does not allow your Ancillary Benefits to be valued and considered as part of your benefit if a splitting court order or superannuation agreement was to be served on the Trustee resulting from your separation from your spouse.
How is an Ancillary Benefit paid?
When an Ancillary Benefit is payable, it will be paid as a lump sum only.
When can you claim your Ancillary Benefits?
You can claim your benefit either:
- when you have reached preservation age and permanently retired from the workforce (regardless of when your MilitarySuper or DFRDB benefit becomes payable)
- when you reach 60 and you have ceased employment or change employers
- when you reach 65 years of age
- if the Board is satisfied that you have met the requirement of total and permanent incapacity
- if the Board is satisfied that you meet the requirements for severe financial hardship or
- if the Australian Prudential Regulation Authority (APRA) approves payment on specified grounds.
Your benefit will also be payable to an eligible spouse, eligible child, or children, or your Estate in the event of your death.Top
Table 1: Preservation ages
| Date of birth | Preservation age |
|---|---|
| Before 1 July 1960 | 55 |
| 1 July 1960 to 30 June 1961 | 56 |
| 1 Jul 1961 to 30 June 1962 | 57 |
| 1 July 1962 to 30 June 1963 | 58 |
| 1 July 1963 to 30 June 1964 | 59 |
| After 30 June 1964 | 60 |
Rolling over your Ancillary Benefits
You can rollover your Ancillary Benefit to another regulated superannuation fund, RSA or Approved Deposit Fund at any time. However, you will not be able to claim the benefit from that rollover institution until the benefit becomes payable under the rules of that fund.
If you have an associate benefit arising from a family law split, contact ComSuper for further information.
Further details of any of the above can be obtained from the MilitarySuper website or by calling 1300 006 727.