Welcome

In this edition of the Employer Newsletter, we discuss the 2009 Federal Budget announcements that affect your employees, as well as a new OTE ruling from the Tax Office and changes to the late payment offset.

We also provide some administration updates and reminders about how to apply for the new quarterly investment update and the calculation of superannuation costs for packaged/contract staff. We explain how Local Government Super is leading the way in managing energy efficient buildings and, as usual, we update you on our investment performance and our forthcoming seminar schedule.

We value your feedback, so please feel free to send us your comments or any suggestions on what articles you'd like to see in future newsletters by emailing: employerservices@lgsuper.com.au.

The 2009 Federal Budget

Federal Treasurer Wayne Swan announced some changes to super in the May Federal Budget that may affect your super savings. Here is a summary of the changes you need to know about:

The Co-contribution Scheme

The Government will temporarily reduce the amount by which it will match the after-tax personal super contributions you make as part of its Co-contribution Scheme. The maximum matching rate will fall from $1.50 to $1.00 (from 1 July 2009), but will revert back to $1.50 in the 2014/15 financial year.

Despite the reduction in the rate, the Co-contribution Scheme still provides a return that’s hard to beat and is one of the best ways of boosting your retirement savings.

If you have an annual income of $31,920 or less, the Government will match your contribution with a payment of $1.00 for every $1.00 you put in up to a maximum of $1,000. The amount the Government pays steadily reduces on incomes over $31,920 and stops after the income level tops $61,920.

Concessional contribution cap to halve from 1 July 2009

The cap on concessional contributions will be reduced from $50,000 to $25,000 a year (indexed) from the 2009/10 financial year.

Concessional contributions are before-tax contributions to super. These are taxed at the concessional contribution tax rate of 15% and include the Superannuation Guarantee (SG) payments and your voluntary salary sacrifice contributions.

The transitional concessional contributions cap for those aged 50 and over - or who turn 50 before the end of the 2011/12 financial year - will also be reduced from $100,000 to $50,000 a year (not indexed).

The annual cap on non-concessional or after-tax contributions will remain at $150,000 in the 2009/10 financial year. After that, it will be six times the level of the (indexed) concessional contributions cap.

Lost super

From 1 July 2010, super funds like Local Government Super will be obliged to transfer any lost super accounts to the Australian Tax Office (ATO). This will include lost accounts with balances of less than $200 and those which have been inactive for more than five years and for which there are not sufficient records to identify the owner.

If you believe you have any lost super, you can track it down at www.ato.gov.au/super or by calling 13 28 65. You will be able to reclaim lost super from the ATO at any time.

New OTE ruling

In May, the Australian Tax Office (ATO) issued a new ruling on the meaning of ordinary time earnings (OTE) - the only earnings base that can be used for calculating minimum employer Superannuation Guarantee (SG) contributions.

The new ruling (SGR 2009/2) replaces SGR 94/4 and 94/5. It differs significantly from a draft of the new ruling released in November 2008.

KEY POINTS

Excluded from OTE:

• Overtime
• Benefits under employee share schemes

Included in OTE:

• Christmas bonuses
• Payments in lieu of notice

“Ordinary hours of work” will be as specified in an industrial award or employment agreement. Exceptions apply and are detailed in the ruling.

The SG status of certain kinds of leave payments have been clarified by recent Superannuation Guarantee (Administration) Regulations effective 1 July 2009. Payments made to an employee in respect of a period of eligible parental leave, an eligible community service activity, or service with the Australian Air Force (for example the Reserves) are not considered to be ‘salary or wages’ under the Superannuation Guarantee (Administrators) Act.

CAUTION

Before making any changes, please refer to the SGR 2009/2 which can be found on the ATO’s website at www.ato.gov.au. The ruling is over 40 pages long and contains a number of examples which may need to be considered first.

Changes to the late payment offset

The late payment offset (LPO) lets employers offset late super contributions they pay to an employee’s complying super fund against the Super Guarantee Charge (SGC) for that employee for that period.

The cut-off date for super contributions is the 28th day of the month after end of the quarter. This is the last day by which an employer can pay a super contribution to an employee's super fund before they are liable for the SGC.

From 26 March 2009, changes to LPO legislation mean that only late contributions paid before the employer’s original SGC assessment is made will be eligible for the LPO.

Eligible employers will generally be able to offset amounts they paid late to a super fund against the SGC if they:

• Have paid the late contribution to the employee’s super fund.
• Have paid the contribution before the original SGC assessment is made.
• Elect to use the LPO within four years of our original SGC assessment.

To receive the late payment offset, eligible employers must make an election on the SGC statement - quarterly (NAT 9599). If they have already lodged this statement, they must complete a Superannuation Guarantee late payment offset form (NAT 14899) instead.

For more information about applying for the late payment offset you, please phone the Australian Tax Office on 13 10 20 between 8.00am and 6.00pm, Monday to Friday.

For copies of the following publications, visit Australian Tax Office’s website at www.ato.gov.au

• Superannuation Guarantee Charge statement - quarterly (NAT 9599)
• Superannuation Guarantee late payment offset form (NAT 14899).

Administration Update

To ensure that contributions are processed as quickly and efficiently as possible, the administration team has the following reminders for you:

• Please ensure when you complete an employer form or provide an Application for Membership form to an employee, it is a current form. For legal reasons we are unable to accept old, out-of-date forms. Most current forms can be printed off from the Local Government Super website. To obtain a copy, please click here. If you have difficulty locating a form please contact Member Services on 1300 369 901.



• When you provide a contribution file for one of our schemes, please ensure you include the Member Number for each employee. If you do not have member numbers for all your employees, please contact the Employer Helpline on 1800 636 441. Our team will provide you with an updated report of your active members, including their member numbers, to enable you to update your payroll system.



• When providing new member information on the contribution spreadsheet, please include full names, not just initials, as well as Tax File Numbers. In addition, please make sure that spouse contributions are clearly indicated.



• When remitting a contribution payment, please ensure that the file you send equals the payment. Please do not send multiple payments with one file or one payment with multiple files. We would prefer that a separate Payment be made for each File. The likelihood of human error is much reduced when there is a single payment and a single file.

Local Government Super’s green initiatives lead the way

Local Government Super (LGS) has become the first building owner in Australia to convert all of the tenants in its 28 Margaret St, Sydney, building over to strong energy efficiency programs and to purchasing 100% Green Power.

Indeed, 10% of Australia’s carbon emissions are caused by the use of electricity by commercial properties. Half of these emissions can be attributed to tenancy energy use and the other half to base building use. However, energy efficiency programs can only reduce emissions so far and property owners still need to buy electricity to run their buildings. Purchasing Green Power allows this energy to be provided with zero emissions.

During the Bali Climate Change Summit in December 2007, LGS was one of five property groups that came together through the Existing Buildings Project to announce that they would reduce emissions by up to 40% below the market average by upgrading their Australian office portfolios to 4.5 NABERS Energy by 2012.

At that time, the group also committed to begin working with their tenants to reduce emissions in the tenancy space. In honouring this commitment, LGS has devised an energy efficiency program for existing tenancy spaces, has set targets to bring existing mid-lease tenants over to 100% Green Power, and requires that all new tenants purchase 100% Green Power.

Congratulating LGS on its progress, the Total Environment Centre recently noted: “This is the type of achievement that will deliver the next big emissions reductions for building owners. Nearly all building owners have set targets for base building emissions reductions, but to extend these targets to the tenancy space is the next phase for emissions reductions interventions by building owners. On this count LGS is leading the way.”

Superannuation "costs" for packaged/contract staff in the Retirement Scheme

Following recent changes to the required employer superannuation contributions, a number of queries have been made relating to the amount that should be deducted from the employee's salary package.

We understand that most Councils have adopted a policy of using the” Notional Cost" as the basis for this deduction. Should this apply to your Council please note the comments below:

The "notional" cost is set by the Actuary and is based on an estimate of the average cost of funding member's benefits. It does not change due to the financial position of the Scheme from time to time.

The Notional Cost, expressed as a percentage of the member’s Superable Salary, is calculated as follows:

Retirement Scheme

Members with less than 180 accrued benefit points:

Member Contribution Percentage¹ x 1.9 + 2.5%

Members with 180 accrued benefit points²:

        9%

A separate notice will shortly be issued in relation to members in the Defined Benefit Scheme.

¹ Subject to a maximum of 9%
² Subject to a minimum 30 years membership

Quarterly investment update invitation

You should have received a letter recently inviting you to receive a regular quarterly investment update. These updates are designed to keep relevant staff informed about the ongoing investment performance of the underlying assets of our defined benefit reserves now that Councils have been required to substantially increase their superannuation contributions.

If you did not receive the invitation or have lost the response details and wish to sign up for the investment update, click here for the faxback sheet. Please print it and fax back to the number on the form.

Quarterly investment returns

June quarter 2009 returns for Contributor Financed Benefit - Retirement Scheme

Strategy	Returns
High Growth	9.6%
Trustee Selection*	3.8%
Diversified	6.5%
Balanced	4.4%
Capital Guarded	2.5%
Cash Plus	2.1%

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.
* Available to Retirement Scheme members only.

June quarter 2009 returns for the Accumulation Scheme

Strategy	Returns
High Growth	8.2%
Diversified	5.5%
Balanced	3.2%
Capital Guarded	1.7%
Cash Plus	2.0%

All figures are shown to one decimal place. Returns may vary slightly between Divisions of the Scheme.

Quarterly Superannuation Guarantee (SG) Contributions

All employers under the SG scheme must contribute the minimum level of 9% of each eligible employee's earning base in super support for each financial year. The SG contribution is required to be contributed on at least a quarterly basis. From 1 July 2008, your employees' earning base is their ordinary times earnings (OTE).

The following describes the ATO deadlines for employer contributions and the penalties that may apply if employers do not meet them. Local Government employers who make monthly contributions in accordance with the Scheme rules will more than satisfy these minimum requirements and will therefore avoid any of the penalties listed.

The ATO imposes penalties if SG contributions are not made by the quarterly cut-off date by applying an SG Charge (SGC)* which is made up of three parts:

• SG shortfall amounts based on ordinary times earnings (OTE)
• Interest on that amount (currently 10% per annum)
• Administration fee of $20 per employee per quarter.

If the SGC and the SGC statement are not submitted by the due date for lodgement additional penalties may apply and these are:

• General Interest Charge (GIC) from the SGC due date will be incurred. GIC compounds daily until SGC and accrued GIC is paid in full. The ATO can reduce the penalty. GIC is tax deductible in the year it is incurred.



• An amendment in the SG legislation, from 24 June 2008, means that if an employer makes an SG contribution to a superannuation fund which is late the employer can elect to have this contribution used to offset against the amount of SG charge they have to pay to the ATO for not meeting their superannuation obligations. Please refer to the ATO website for further information at www.ato.gov.au.



• Penalties may also apply for false or misleading statements, avoidance, failure to provide information or failure to keep SG records.

The following table obtained from the ATO lists the standard cut-off and lodgement dates.

Superannuation Guarantee quarter ended	Cut-off date for Superannuation Guarantee Contributions	Due date for lodgement of an SG statement and payment of the SG charge if contributions are not made on time
1 July - 30 Sept	28 October	28 November
1 Oct - 31 Dec	28 January	28 February
1 Jan - 31 March	28 April	28 May
1 April - 30 June	28 July	28 August

* The SGC is not tax deductible and cannot be reduced by the ATO.

Would you like to see more of us?

As part of our service to you we offer free pre-retirement seminars to your employees, either on your site or at a venue close to you. If you'd like to organise a free seminar for employees, please call 1800 636 441.

Free pre-retirement planning seminars

Pre-retirement seminars are targeted at people who are over 50 years of age and provide information on the following:

• Maximising Super Benefits
• Decision Time
      - Income Streams in Retirement
• Centrelink
      - Age Pension & Allowances
      - Asset and Income Tests
• Financial Planning
      - The importance of qualified Financial Planning advice
      - Estate Planning
  Refreshments are provided.

For details of the forthcoming Pre-Retirement Seminars, click here.

Office locations

Lismore
81-83 Molesworth Street

Newcastle
161 King Street

Orange
187 Summer Street

Sydney
28 Margaret Street

Parramatta
10-14 Smith Street

Wagga Wagga
2/209 Baylis Street

Wollongong
Shop 2/60 Burelli Street

Albury* 621 Dean Street
*Note: Bookings are essential.

Are you sending your communications to the right place?

The following is a one-stop reference guide to all the relevant contact numbers and addresses through which employers are to send communications.

Fax
All employer faxes are to be sent to: 02 9299 9321

Contribution Return Emails
All Contribution Return e-mails are to go to the following e-mail address: employeronline@lgsuper.com.au

All Other E-mails
employerservices@lgsuper.com.au

Telephone
For all employer inquiries, please call 1800 636 441

Writing
If you are writing to Local Government Super, please address the letter as follows:
Local Government Super
PO Box N835 Grosvenor Place
NSW 1220

Please note that the information contained in this document is of a general nature only and does not constitute personal advice as it does not take into account your personal objectives, financial situation or needs. Any advice in this document is provided by FuturePlus Financial Services Pty Limited (ABN 90 080 972 630) as an Australian Financial Services Licensee (AFSL 238445) on behalf of the Trustee of Local Government Super, LGSS Pty Limited (ABN 68 078 003 497). LGSS Pty Limited is an APRA Registrable Superannuation Entity Licensee (ABN Pool A - 74 925 979 278 and ABN - Pool B 28 901 371 321). A reference to Local Government Super refers to Local Government Superannuation Scheme Pool A and Pool B as the context requires. Local Government Super is a registered business name of LGSS Pty Limited. Members should not rely solely on this information and should consider their own personal objectives, financial situation and needs before acting on this information. Prior to making any investment decision you should obtain and consider the relevant Product Disclosure Statement (PDS) pertaining to your membership and seek professional investment advice.