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Australiansuper's Tax Transparency Report

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Australiansuper's Tax Transparency Report AustralianSuper’s tax transparency report Contribution to Australia’s tax system FY17 Introduction Australia’s tax regime for AustralianSuper invests over $130 billion on superannuation funds behalf of more than 2 million Australians with the Superannuation is a long-term retirement aim of helping them achieve their best possible savings system and a special tax regime applies retirement outcomes. to Australian superannuation funds including AustralianSuper. In doing this, AustralianSuper plays a significant role in the Australian community and national The tax that Australian superannuation funds economy. pay largely depends on the type of income generated and the retirement savings phase For the 2017 financial year (FY2017), of members. AustralianSuper paid almost $1.4 billion of income tax in Australia – which makes Like all superannuation funds, AustralianSuper AustralianSuper one of Australia’s largest is required to pay tax on: taxpayers. › contributions that we receive from or on AustralianSuper is pleased to publish this tax behalf of members transparency report which follows the federal › investment earnings that we generate for government’s introduction of the Voluntary Tax some members Transparency Code (the Code). The key aim of › some benefits that we pay to members. the Code is to encourage greater tax related public disclosure and transparency. This has been summarised in the table below. Whilst the specific requirements of the Code do not extend to include superannuation funds, AustralianSuper is pleased to support this initiative through its voluntary participation. Australia’s tax on superannuation funds Contributions Investment earnings Investment earnings Benefits paid for members in for members in to members accumulation phase pension phase Contributions made by Investment earnings Investment earnings Benefits paid employers on behalf of that support member that support member to members are members are generally assets in accumulation assets in pension generally not taxed taxable at 15%* phase are generally phase are generally in AustralianSuper, taxable at 15%† not taxable however we may be Contributions that required to withhold members make from Franking credits and Franking credits are tax when paying a their after-tax income, offsets for foreign tax applied to increase benefit. The amount of and member asset paid on investment pension member tax withheld depends roll-ins from other earnings are applied to assets on the type of benefit, and the age and super funds, are offset tax payable circumstance of the generally not taxable Foreign tax paid on recipient earnings that support member assets in pension phase is not creditable * Members that earn over $300,000 (in 2017) may be required to pay an additional 15% tax on their contributions, bringing their overall contribution tax rate to 30%. If members don’t provide us with their TFN, their contributions are taxed at 49% (in 2017). † Investment gains made on long term capital assets are taxed at an effective rate of 10%. AustralianSuper’s tax transparency report | 2 AustralianSuper’s approach to tax risk AustralianSuper’s FY2017 tax payments management and governance AustralianSuper pays a range of different taxes AustralianSuper’s approach to tax risk to the Australian state, territory and federal management and governance aims to support governments each year. The chart below AustralianSuper’s objective of helping members summarises the taxes that AustralianSuper paid achieve their best possible retirement outcomes. for FY2017, and also the factors that influence the amount of those taxes paid. To do this, AustralianSuper ensures the highest possible standards of integrity and transparency are applied to all our tax affairs, while adopting AustralianSuper tax paid 2017 an approach that appropriately maximises after-tax returns for members. The key purpose of our tax risk management and governance process is to ensure our tax affairs are managed so that we comply with all our tax obligations and pay the correct tax in all countries, ensuring we: › comply with both the letter and the spirit of the tax laws › maintain an open, honest and co-operative approach with all tax authorities › do not engage in aggressive tax planning practices › do not tolerate practices that rely on secrecy. Tax paid $(m) Amount of tax paid is driven by: AustralianSuper’s process ensures that its tax positions are reviewed with the aim of ensuring Contributions and Income tax 1,368 that AustralianSuper does not take aggressive investment returns tax positions and that we always work with tax authorities as a responsible taxpayer to comply Direct foreign Foreign investment 77 with all tax laws. taxes returns Benefit payments Our approach to tax risk management and Withholding 83 to members (borne governance is approved by AustralianSuper’s tax directly by members) Board, and is documented in our tax risk management & governance framework in Employee salaries Withholding 31 (borne directly by accordance with ATO public guidance. tax employees) Employment Employee salaries and The ATO has rated AustralianSuper as a 6 taxes benefits ‘key taxpayer’ and assessed us as having a lower likelihood of non-compliance. Acquisition of goods GST 6 In an assessment confirmation from the ATO and services (29 November 2016), the ATO stated that: “ Over the past year, AustralianSuper has Total 1,571 clearly demonstrated an ongoing willingness to maintain a cooperative and open relationship with us [the ATO] on a real time basis.” AustralianSuper’s tax transparency report | 3 AustralianSuper’s FY2017 income assets in pension phase are exempt from tax, tax expense and long term capital gains are allowed a one- third capital gains tax discount. Most transfers Income tax expense is calculated using in from other superannuation funds are also not accounting principles and is included in our taxable. financial statements, published on our website. The accounting standards for superannuation The Australian tax law also allows tax offsets (for funds require that income from investing example, for foreign tax and franking credits that activities be shown separately to member reflect that tax has already been paid) which related activities. This is shown in the table apply to offset our tax payable. below. This means that our income tax expense is lower As a superannuation fund, our taxable income than 15% of our accounting income. The table is taxed at 15%, however some income that is below reconciles the differences between our included as income for accounting purposes FY2017 accounting income (at 15%) to our is not included in income for tax. For example, income tax expense. investment earnings that support member FY2017 reconciliation of accounting income Income Change in Total to income tax expense ($m) Statement members’ benefits Accounting income 12,593 15,739 28,332 Prima facie income tax expense 1,889 2,361 4,250 (at the superannuation tax rate of 15%) Adjusted for tax effect of the following items: Non-taxable member contribution -339 -339 Non-taxable transfers in from other superannuation funds -930 -930 Tax deductible Group Life insurance premiums -99 -99 Anti-detriment tax deduction on death benefits -17 -17 Capital gains tax concession and tax exempt capital gains -492 -492 Tax exempt income supporting pension balances -197 -197 Franking credits and foreign tax offsets -349 -349 Other -1 -1 Over-provision for tax in the prior year -59 -59 Income Tax Expense 791 976 1,767 Effective rate of income tax expense (after adjustment for 6.3% 6.2% 6.2% amounts which are not deductible/not taxable) AustralianSuper’s tax transparency report | 4 The actual income tax that AustralianSuper pays The financial result of AustralianSuper Pty Ltd each year is different to the amount of income can be impacted by timing differences in tax expense shown in AustralianSuper’s financial charging the trustee fee. In FY2017, statements each year. This is largely due to the AustralianSuper Pty Ltd’s trustee fee income income tax expense including a provision for tax was $375 million, and its operating costs were on items which are assessable or deductible for $370 million (resulting in a net accounting tax purposes in a different year. For example, income for FY2017 of $5 million). This income unrealised market value movements on recouped prior year losses and AustralianSuper investments are recognised for accounting each Pty Ltd was not required to make payments of year, but are only taken into account for tax tax to the ATO for FY2017. purposes when we sell those investments. AustralianSuper’s global investments The below table shows the difference between AustralianSuper invests globally to diversify the amount of income tax expense in our investments across a broad range of assets, financial statements, compared to the income which helps achieve the best possible returns for tax that we paid for FY2017. members. We pay tax in accordance with the tax rates and tax laws in the foreign countries in FY2017 reconciliation Income Change in Total which we hold investments. of income tax Statement members’ expense to income benefits Our global investments include interests in listed tax paid ($m) equities, cash and fixed interest securities. Our scale and reputation also allows us to invest in Income Tax Expense 791 976 1,767 unlisted assets such as property, infrastructure and private equities. Over-provision for tax -32 -32 in the current year* In order to access global unlisted assets which provide diversification
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