Understanding the superannuation surcharge debt
The surcharge was a Government imposed tax on eligible super contributions made by employers for higher income earners between 1996 and 2005. This tax was immediately deducted from all accumulation members’ accounts so they do not have a surcharge debt.
How did I get a surcharge debt?
For defined benefit members, AvSuper paid this surcharge on your behalf. This created a debt to the fund from the date it was paid. Interest is applied to this debt weekly at our Growth (MySuper) Option’s earning rate, whether negative or positive, and the debt is fully recovered by AvSuper from your account balance when you or your beneficiaries end your defined benefit, including a rollover to another fund or starting an income stream. Any outstanding surcharge amount is listed on your annual member statement and within the benefits section of Member Online.
What are my options for that debt?
Option 1 – Pay off the surcharge debt as soon as possible
Option 2 – Let the debt grow and have that amount deducted from your final balance
Option 3 – Make voluntary contributions from your after tax income to counteract the interest accruing on the debt (eg investing your after tax contributions in a higher returns option often means the returns are actually higher than the interest charged)
Option 4 – Make after tax contributions to your spouse’s account to counteract the interest applied and, if your spouse is a low income earner, you may also be able to claim the 18% spouse tax offset
Which option is best will depend on your personal circumstances, such as the time until you retire, your risk comfort level, your overall contribution levels (remember that contribution limits apply) and your current financial commitments. Please make an appointment with one of our consultants if you would like personalised advice on a strategy to suit your needs.
How can I pay off that debt?
If you want to pay off your debt now, you can pay some or all of it by telling us (in writing) to withdraw a specific amount or the total from your accumulation account. We can open an accumulation account for you if you wish to pay off the debt in this way.
You can make a personal or salary sacrifice contribution to your accumulation account to cover the payment or accept a lower super balance. Alternatively, you can pay money directly into our bank account and tell us (via email or letter) your member number and that the deposit was to pay your surcharge debt.