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Electricity Industry Superannuation Scheme - Pension Tax Offset Calculator
How does this work?
WARNING: This is not a simple subject. You may not understand something the first time around.
The primary purpose of this calculator is to allow members to understand how the tax offset is calculated on pensions. The calculator shows how a pension before tax offset is
converted to a pension after tax offset. The conversion is required because employer contributions in the Scheme are now taxed, and pensions paid from the Scheme are now
eligible for a tax rebate. For more information, please read the information sheet on the tax offset that was sent to you with your 2005 statement. This info sheet is available on
the Scheme's website.
The most readily available source of data is your annual member statement, and helping members to understand their statement was the main reason for providing
this calculator.
In the Inputs section, you need to:
1) Input your data in the green cells. See the notes for more information.
2) Check that the tax rates used in the calculation are still current (you can get the current rates from the ATO website www.ato.gov.au)
Note that the green cells are the only ones you can change.
In the Calculation section, the process is that the spreadsheet calculates the net pension you would have received if no rebate was available ("non-rebateable pension"), and
then works out the gross rebateable pension that gives you the same take home amount. Steps 1 and 3 are intermediate steps that are used in the tax calculations.
The income tax calculations work by finding the tax band in which the income falls.
The tax payable on that income is then the tax payable on the lower end of that band, plus a percentage of any extra amount.
For example, if the income is between $21,600 and $63,000, then the tax is $2,574 (tax payable on $21,600) plus 31.5% of income above $21,600 (based on 2005/2006 tax
rates).
Inputs
Member Data The data required here is on your statement, or should be readily available to you.
Sex M Fortnightly pension (before offset): See under Summary of Your Benefits, before
contribution tax offset (top of page 2). We expected that you would use your
Date of birth 1/1/1942 retirement/retained pension, with a commencement date of the date of your statement.
Fortnightly pension (before offset) $1,000.00 or % of salary 0.00% Undeducted contributions: See under Your Details (bottom of page 2)
Undeducted contributions 40,000.00 Final Scheme Salary: Also under Your Details
Final Scheme Salary 50,000.00 If a $ pension is entered, that will be used. If a % is entered, it will be multiplied by your
final scheme salary.
Pension commencement date 7/1/2005
Income tax table Underlying tax rates used in calculation
Income from $ plus % The table at right generates Effective to 6/30/2006
0 0.0% the table at the left. This 0 6,000 0.0%
6,000 $0 16.5% allows the tax on a pension to 6,000 21,600 15.0%
21,600 $2,574 31.5% be calculated quite simply 21,600 63,000 30.0%
63,000 $15,615 43.5% (see below). - if tax rates 63,000 95,000 42.0%
95,000 $29,535 48.5% change, change the 95,000 500,000 47.0%
500,000 $225,960 underlying rates 500,000 Medicare levy 1.5%
Version: 2006.1 Page: 1
Electricity Industry Superannuation Scheme - Pension Tax Offset Calculator
Calculations
Step 1: Calculate deductible amount (Intermediate step)
This amount is received tax free by you every year that you are paid the pension.
It is based on the amount of your undeducted contributions, which are contributions from your after
tax salary that you have already paid tax on. This is why you get them tax free in your pension.
Age 63
Life expectancy 19.24 This is a tax office factor, based on your age and your spouse's age at the date your pension starts.
Undeducted contributions 40,000.00 As entered above
Deductible amount 2,079.00 Tax free amount every year = undeducted contributions/life expectancy
Step 2: Calculate net value of non-rebateable pension
This step calculates the net pension that you would have received had privatisation not occurred and
the Scheme had remained untaxed. You would have paid full income tax on your pension, other than
the deductible amount which is tax free.
This step takes your gross untaxed pension, takes off the deductible (as that is not taxed), calculates
the tax payable and hence the net pension. What you get to take home is the net pension plus the
deductible.
Gross non-rebateable pension 26,000.00 equals the fortnightly pension entered above times 26
Taxable amount 23,921.00 gross pension net of deductible Lookup Income from $ plus %
Income tax -3,305.11 3 21,600.00 2,574.00 31.5%
Net pension 20,615.88 net of deductible This is a simple tax calculation, looking up which line of
Take home pension 22,694.89 including deductible the income tax table is applicable, and then applying the
rates
Step 3: Calculate the nil tax threshold for the rebateable pension (Intermediate step)
The threshold is the point at which you begin paying tax on the pension, allowing for the 15% rebate.
This is the point where the average rate of tax on the taxable amount equals 15%.
Threshold for rebateable pension 25,636.36
Version: 2006.1 Page: 2
Electricity Industry Superannuation Scheme - Pension Tax Offset Calculator
Step 4: Solve for taxed pension
This step calculates the rebateable pension (ie for which you receive a 15% tax rebate) that gives
you the same take home pension as Step 2. We solve for the Net pension shown in step 2, and then
add the deductible back on.
This is done as a series of steps, dealing with each income tax band in turn. When the answer is
found, it is put in the solution column on the right.
Solution
Is the target income below the nil tax threshold? YES 20615.88
Threshold 25,636.36
Take home income 25,636.36
Is the target income within the next threshold? NO 0.00
Threshold 63,000.00 Tax rate 31.5%
Income tax $15,615 Rebate 9,450.00
Take home income 56,835.00
Is the target income within the next threshold? NO 0.00
Threshold 95,000.00 Tax rate 43.5%
Income tax $29,535 Rebate 14,250.00
Take home income 79,715.00
Is the target income within the next threshold? NO 0.00
Threshold 500,000.00 Tax rate 48.5%
Income tax $225,960 Rebate 75,000.00
Take home income 349,040.00
Solution 20,615.88
Add back deductible 2,079.00
Gross taxable income 22,694.89
Step 5: Check calculation of rebateable pension
Gross rebateable pension 22,694.89 Similar tax calculation as step 2
Taxable amount 20,615.88 Lookup Actual rates used for this member
Income tax -2,411.62 2 6,000.00 0.00 16.5%
Rebate 2,411.62 This is the smaller of 15% of the taxable amount and the tax payable
Take home pension 22,694.89 This should be the same as the take home pension in step 2
OK
Version: 2006.1 Page: 3
Electricity Industry Superannuation Scheme - Pension Tax Offset Calculator
Summary
Non-rebateable Pension per fortnight % of Final Scheme Salary
Gross 26,000.00 1,000.00 52.00%
Income tax -3,305.11
Rebate 0.00
Take home 22,694.89 872.88 45.39%
Rebateable Pension
Gross 22,694.89 872.88 45.39%
Income tax -2,411.62
Rebate 2,411.62
Take home 22,694.89 872.88 45.39%
Please Note:
The results shown here are based on the information entered. This does not entitle you to any particular benefit from the Scheme. Your benefit from the
Scheme will be determined based on the information available and your circumstances at the date you become entitle to a benefit under the Rules of the
Scheme.
This calculator reflects, to the best of the Scheme Board’s knowledge, the administration of the Rules covering the tax offset. You should check the details
carefully and if you believe there are any errors please contact the Scheme at inquiries@electricsuper.com.au or 08 8404 5707 or write to GPO Box 854
Adelaide SA 5001.
Errors do sometimes occur and we reserve the right to correct them.
This calculator has been tested using Office XP running under Windows XP. The Board has no reason to believe that it is unsuitable for other system
configurations. Please bear in mind that individual configurations may vary, and hence caution should be used.
Version: 2006.1 Page: 4
Statutory table
Age Male Female
25 53.77 58.61
26 52.83 57.63
27 51.89 56.65
28 50.95 55.68
29 50.01 54.70
30 49.07 53.72
31 48.13 52.75
32 47.19 51.77
33 46.24 50.80
34 45.30 49.82
35 44.35 48.85
36 43.41 47.88
37 42.47 46.91
38 41.53 45.94
39 40.58 44.98
40 39.65 44.01
41 38.71 43.05
42 37.77 42.09
43 36.84 41.14
44 35.91 40.18
45 34.98 39.23
46 34.06 38.28
47 33.13 37.33
48 32.22 36.39
49 31.30 35.45
50 30.39 34.51
51 29.49 33.58
52 28.59 32.66
53 27.69 31.73
54 26.80 30.82
55 25.92 29.91
56 25.05 29.00
57 24.19 28.10
58 23.34 27.21
59 22.49 26.32
60 21.66 25.44
61 20.84 24.57
62 20.04 23.71
63 19.24 22.85
64 18.46 22.00
65 17.70 21.15
66 16.95 20.32
67 16.21 19.49
68 15.48 18.67
69 14.78 17.87
70 14.08 17.08
71 13.41 16.29
72 12.75 15.53
73 12.11 14.78
74 11.50 14.05
75 10.90 13.33
76 10.32 12.63
77 9.77 11.94
78 9.24 11.27
79 8.73 10.61
80 8.24 9.98
81 7.77 9.38
82 7.32 8.81
83 6.89 8.27
84 6.48 7.76
85 6.11 7.28
86 5.77 6.83
87 5.47 6.41
88 5.20 6.02
89 4.95 5.66
90 4.74 5.33
91 4.54 5.03
92 4.36 4.75
93 4.19 4.50
94 4.03 4.28
95
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