Taxation
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Taxation Rulings Overview
NEST has applied for and holds a number of important taxation rulings. These rulings provide benefits to employers, employees and the NEST fund. The table below provides a summary of NEST’s taxation rulings.
Taxation Ruling Details
Ruling Type
Under existing laws, employers are required to pay or accrue provisions for employee entitlements in accordance with their relevant Employment agreement. Currently under the Income Tax Assessment Act 1997 (ITAA 97) s26-10, the employer only receives a tax deduction once the employee’s entitlements are paid to the individual to whom it relates in the income year of payment.
NEST holds Class Ruling (CR 2009/59) with the Australian Taxation Office (ATO) which enables participating employers to claim a deduction under the Income Tax Assessment Act 1997 (ITAA) S8-1 for the amount of the contribution to NEST. This means that any employee entitlements contributed to NEST, as required by an Employment Agreement, are tax deductible at the time that it is paid into NEST.
Australian Tax Office
Link
Explanation
Issued By
Class ruling 2009/59 Tax Deductibility
Ruling Type
NEST holds Class Ruling (CR 2009/49) with the Australian Taxation Office which states; where an employee member of NEST receives a payment of employee entitlements directly from NEST, then that payment may receive concessional taxation treatment, in the same manner applicable, had the payment been made by the employer to the employee.
This means that no employee member of NEST will be disadvantaged when paid their entitlements directly from NEST. Regardless of the type of employee entitlement paid the employee will receive the exact same amount after tax that would have been received had the employer made the payment to the employee.
Australian Tax Office
Link
Explanation
Issued By
Class ruling 2009/49 Member Payments
Ruling Type
NEST holds Private Ruling Authorisation Number (94062) which states; NEST is not assessable under section 6-5 of the “Income Tax Assessment Act 1997” on the employer contributions made to the fund.
This means that contributions made by employers into NEST, representing employee entitlement accruals for the capital of the NEST trust and will not be taxed as income to the fund. This private ruling ensures that both employers and employees are protected from having employee entitlement contributions diluted by tax.
Australian Tax Office
Link
Explanation
Issued By
Private Ruling f Authorisation Number 94062 Contributions are not income
Ruling Type
NEST is prescribed in legislation under the “Fringe Benefits Tax Assessment Act 1986” (s58PB) as an approved worker entitlement fund. This means that contributions representing employee entitlements that are paid into NEST will not create a fringe benefit tax liability to the employer or employee.
Commonwealth of Australia
Link
Explanation
Issued By
Legislative – Fringe Benefits Tax Assessment Act 1986
Ruling Type
Employers making contributions into NEST will not be charged GST on these payments. This is in accordance with the GST Act (A New Tax System (Goods and Services Tax) Act 1999), which states that salaries and wages are GST exempt. NEST contributions represent salaries and wages and are therefore GST exempt.
Commonwealth of Australia
Link
Explanation
Issued By
Legislative – GST Act (A New Tax System (Goods and Services Tax) Act 1999)
Ruling Type
Class ruling 2009/59
Tax deductability
Class ruling 2009/49
Member payments
Private Ruling 94062
Contributions are not income
Legislative
Fringe benefits tax
Legislative GST
Issued by
Description
Australian Taxation Office
Australian Taxation Office
Australian Taxation Office
Australian Taxation Office
Australian Taxation Office
Employer contributions into NEST are tax deductible at the time the contributions are made
Payments directly from NEST to an employee retain the same concessional treatment as if NEST was the employer
Trustee of NEST is not assessable under the "Income Tax Assessment Act 1997" on employer contributions made to the fund
NEST is prescribed in legislation as an approved Worker Entitlement Fund (WEF). As a result, employers are not liable for FBT on contributions paid into NEST.
Contributions for employee entitlements are catagorised as salary and wages and as such are GST exempt.
Other Taxation Matters
GST on Administration Fees
GST does apply to administration fees charged to the trust. The government however allows up to 75% of GST charged to the fund to be reclaimed. NEST claims GST paid by the trust and distributes it to the beneficiaries annually.
Tax File Numbers
Where employee Tax File Numbers are not provided and where applicable; NEST must deduct tax from payments made to employees at the highest marginal tax rate. This usually occurs where an employee receives a trust distribution or interest payment.
State Taxes and Levies
NEST does not change the way an employer administers state taxes and/or levies such as payroll tax and workers compensation premiums. Employers can continue to run these obligations through their normal payroll process.