While superannuation funds are authorised to collect your Tax File Number (TFN) under the Superannuation Industry (Supervision) Act 1993, you’re not obligated to give or quote your TFN to your super fund. However, there are consequences for not giving your TFN to your super fund; eg, you may have to pay more tax and your super fund cannot accept certain contributions.
In this article, I want to outline the importance of a TFN in relation to superannuation contributions to help you understand how it works.
What is a Tax File Number?
Briefly, TFN is a unique 9 digit number issued by the Australian Taxation Office (ATO) to each individual tax payer or company to identify their tax records.
TFN and non-concessional contributions
If your super fund doesn’t have your TFN, they cannot accept your non-concessional contributions. These are contributions that you personally made from your after tax money (or made by your employer from your after tax salary). If they don’t have your TFN, your super fund has 30 days to return these contributions. In the first 30 days, they will attempt to contact you to try and obtain your TFN.
If you can’t make a personal contribution, you may also be missing out on a co-contribution as well.
TFN and Concessional contributions
If your super fund doesn’t have your TFN, they can accept your concessional contributions; however, you may have to pay additional tax on these contributions. This is called a no TFN tax.
Concessional contributions are made by your employer on your behalf which include the compulsory superannuation guarantee, salary sacrifice and any other additional contributions made by your employer. If you’re self-employed, make a personal contribution and you claimed it as a tax deduction; this contributions will also be classified a concessional contribution.
All concessional contributions are subject to a 15% tax. This is called contributions tax, which is deducted by your super fund and pay to the ATO at the time of receiving an allocating the contribution to your account.
What is a no TFN tax?
A no-TFN tax is an additional tax you have to pay on your concessional contributions if your super fund doesn’t have your TFN. This is 31.5% of the contribution received, on top of the 15% contributions tax already deducted and paid to the ATO by super funds on the receipt of the contribution. Please note this will increase to 32% from 1 July 2014 due to the Medicare levy increasing to 2%.
When do you have to pay the no-TFN tax?
When your super fund receives a concessional contribution from your employer, they allocate it to your account and deduct the normal 15% contributions tax from it.
If your super fund doesn’t hold your TFN, you may have to pay the no-TFN tax. However, you have up until 30 June of the year the contribution was made to give the TFN to your super fund. If as at 30 June and your super fund still don’t have your TFN, they will deduct the no-TFN-tax from the total concessional contributions received for the year. In this instance, the total tax payable by you is 46.5% (15% contributions tax & 31.5% no-TFN tax.
Please note the no-TFN tax does not apply if your account was opened prior to 1 July 2007 and the total concessional contributions received by your super fund is less $1,000 in a financial year. If the total contributions exceed $1,000, the total amount will be taxed at 31.5%.
If your account was opened after 30 June 2007 and you have not provided your TFN, all concessional contributions will be taxed at 31.5%.
The no-TFN tax does not apply to contributions received prior to 1 July 2007.
What happens if you subsequently give your TFN to your fund?
The no-TFN tax may be claimed back from the ATO if you subsequently give the TFN to your super fund. You can only claim back the no-TFN tax from the previous 3 financial years if you give your TFN to your super fund within 4 years of making the contribution.
For example, if you give your TFN to your super fund on 30 June 2014, you’ll be able to claim a no-TFN tax refund for the 2013, 2012 and 2011 financial years only. In this example, you can’t claim the 2014 no-TFN tax because there is none as you have quote the TFN to your super fund.
All you have to do is give your TFN to your fund; they will immediately credit your account with the no-TFN tax and claim it back from the ATO in the fund’s tax return as an offset.
Note that some funds will charge you a fee to recover the money back from the ATO for you. I know one fund is charging $100.
You should note that if you have exited from the fund that received the contribution, you would not be entitled to the no-TFN tax refund.
What you need to do?
While you’re not obligated to give your TFN to your super fund, however, if you give it to your employer when you start working, they are obligated to pass it on to your fund unless you tell them not to.
My advice is not to rely on your employer to pass on your TFN to your fund. If you’re not sure ring them up and ensure that they have it or check your statements they send to you which also indicate whether or not they have it.