Daton clarifies taxation of funds, contributions

INTERNAL Revenue Commission acting Commissioner-General Dr Alois Daton has clarified the difference in taxation contributed by employers and employees to authorised superannuation funds.
The taxation of authorised superannuation funds and superannuation contributions deducted from the salary and wages of employees and remitted to an Authorised Super Fund (ASF) are classified into three categories for tax purposes: Employee contributions, employer contributions, and interest accumulated on funds and distributed to members.
Daton said employee contributions arose from the net (after tax) salary of the employee.
As they have already been taxed, they are not supposed to be taxed when the employee contributions are distributed to a member by the ASF.
This is the same treatment for voluntary additional contributions savings.
Employee contributions to ASFs are a way the Government encourages a savings culture among employees through the use of a retirement savings plan.
Daton said employer contributions were not taxed at the time they were transferred to an Authorised Superannuation Fund.
This is because they are not regarded by the tax law as an income of the employee but as capital arising from the property of the employer.
“The Authorised Superannuation Fund is taxed only on its profits arising from investments realised from its members’ contributions,” he said.
“Authorised Superannuation Funds are not taxed at the Corporate Tax Rate of 30 per cent but are taxed at a lower rate of 25 per cent.”
“The interest accumulated on an ASF members account (the profit from the investment of the funds) is taxed at 25 per cent to the ASF.”