Welcome

In this edition of the Employer Newsletter, we report back on how the changes we are making to the structure of our investment portfolios are starting to pay off.

We also alert you to the possibility that employees who salary sacrifice may be penalised by the ATO if they exceed new contribution caps for this financial year, provide an update for the calculation of superannuation costs for packaged/contract staff in the Defined Benefit Scheme along with information about the new billing cap in that Scheme and we discuss a new ordinary time earnings (OTE) ruling dealing with workers' compensation payments.

In addition, we profile the Newcastle team, which is on hand to assist you or staff members with any enquiries about super and LGS and we remind you about a number of important administration issues. These include how you should be paying contributions and what to do when staff join or leave employment, or are approaching the age of 70. 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.

Investment changes start paying off

Changes made to the structure of investment portfolios have started to pay off.

Local Government Super has over the last year undertaken a complete review of its investment portfolio.

Our main objectives were to simplify the portfolio's investment structure and lower costs. We also decided to progressively sell off those investments that had underperformed during the global financial crisis and which, we believed, still remained relatively risky, such as hedge funds.

As part of the restructure, we have adjusted the percentage allocated to different asset classes - such as Australian and international equity, property, fixed interest and cash - in the various investment strategies we offer members.

These moves have started paying off. While returns for the 2008/09 financial year were significantly affected by the financial crisis, the results since we started implementing the changes have been encouraging.

The changes contributed to a strong performance in the final quarter of the 2008/09 financial year when most of our investment options produced above average returns when compared with other funds. Indeed, our Cash option was ranked number one in the SuperRatings, as at 30 September 2009 for the quarter and for the year (12 months to end of September 2009).

The new target asset allocations of each investment strategy are detailed in the Supplementary Product Disclosure Statement we mailed to members in August. Please note, however, that we continue to implement the asset allocation changes incrementally and in line with the opportunities available in the investment markets.

As a result of these changes, the Trustees have also changed the names of some of the investment strategies to what they believe are more accurate descriptions of their underlying characteristics.

Also, upon being notified about the death of a member, we will now automatically switch any of the deceased's "accumulation" or invested benefits to the Cash strategy where they will remain until the death benefit is paid out. For various reasons some death claims can take a long time to finalise and this change will make the deceased's benefit more stable during the death benefit assessment and payment process, providing greater certainty for beneficiaries during that time.

If any of your employees have questions about the changes in the investment portfolio or believe that the new characteristics of their chosen investment strategies no longer meet their needs, please refer them to our Member Services team on 1300 369 901.

Reduction in contribution caps

Employers should be aware that employees salary sacrificing may be at risk of exceeding the new contribution caps and of incurring excess contributions tax.

In the May 2009 Federal Budget, the Government halved its cap on the amount of concessional (or pre-tax) contributions members can make to super to $25,000 a year (indexed). This change came into effect on 1 July 2009.

Income that's salary sacrificed as additional superannuation contributions is counted towards the concessional contributions cap, as is the 9% Superannuation Guarantee.

The transitional concessional contributions cap (for members aged 50 and over or who turn 50 before the end of the 2011/12 financial year) has also been reduced from $100,000 to $50,000 a year.

The annual cap on non-concessional or after-tax contributions remains at $150,000 per annum for the 2009/10 financial year. It will in future be calculated as six times the level of the (indexed) concessional contributions cap.

Excess concessional contributions are currently taxed at 31.5% in addition to the standard 15% contributions tax. So, to help your staff avoid any nasty surprises, it's important to review any salary sacrifice arrangements you make on their behalf. Remember that our team is on hand to help you through this process and in communicating these changes to your employees. Just call 1800 636 441 for assistance.

New OTE Ruling – Workers' Compensation Payments

Any workers' compensation payments received by an injured employee for the hours the employee performs work or attends work is classed as ordinary time earnings (OTE) and the Superannuation Guarantee (SG) is payable.

In contrast, if the employment has been terminated or if the employee is paid workers' compensation for hours not worked (or not attending work as required), the payment would not count as “salary or wages". This payment is not classed as OTE and no SG contributions should be paid.

Superannuation "costs" for packaged/contract staff in the Defined Benefit 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.

Superable Salary and 'notional oncost':

The method used to calculate Superable Salary based on "notional cost", uses the following formula:

Total Remuneration Package (TRP) / (1 + your oncost factor %*)

*Your oncost factor is established based on your age at fund commencement, gender and the number of years to normal retirement age. This factor is expressed as a percentage, includes 2.5% for the Basic Benefit and does not change.

The method used to calculate the long term cost or ‘notional oncost’ will also remain unchanged and is calculated as follows:

Notional Oncost = TRP – Superable Salary

Example:

If a member’s TRP is $120,000 and the oncost factor is 10.2%:

Superable Salary = $120,000 / (1 + 10.2%)
= $120,000 / 1.102
= $108,893

Notional Oncost = $120,000 - $ 108,893
= $11,107

Defined Benefit Scheme – New billing cap

To ensure that employer funding requirements in the Defined Benefit Scheme are shared amongst employers on an equitable basis Local Government Super has decided to introduce a billing cap.

In future, the employer’s contribution requirements will be capped at a maximum member contribution of 9% of salary.

For example, let’s take a member whose salary is $121,097 and whose current annual member contribution percentage is 13.5%.

Using the current factor of 3.28 for "pooled" employers you would previously have been billed:
($121,097 x 13.5% x 3.28)/12
= $4,468.48 per month*.

Under the new rules, the cap changes the billable amount to:
($121,097 x 9% x 3.28)/12
= $2,978.99 per month*.

In this example, the employer would save $1,489.49 per month* because of the new billing cap.

You should note that the Basic Benefit amount is unaffected by the new billing cap and remains payable in addition to the amounts above.

The new billing cap will have a retrospectively effective date of 1 July 2009 and any credit amounts will be backdated to that date. As this is a recent change and some work needs to be made to our administration system to accommodate it, the new billing amounts will not appear in the November bill but they should appear as adjustments in the December bill.

If you have any questions about how this change might affect you, please contact Employer Services on 1800 636 441.

* Member contribution amounts in the Defined Benefit Scheme are due on a four-weekly basis, so the actual amounts that appear in the bills are converted to a monthly figure and then used to calculate the employer billing amounts.

Who's who in the Newcastle regional office?

The Newcastle office was first opened for business on 8 July 2004 in Darby Street, Cooks Hill, and then relocated to its present position at 161 King Street in September 2005. In July 2008, the Newcastle office combined with the Lismore office to form the Newcastle-Lismore Region with the regional office based in Newcastle.

The regional office services an area from Gosford in the South to Tweed Heads in the North and the New England and above, up to Moree in the North West. The team is on hand to assist with any superannuation queries or issues you and your employees may have.

Meet the Newcastle office:

Newcastle office:

Maurie Bettinzoli is the Regional Manager. Maurie has been with FuturePlus Financial Services for five years and in the finance Industry for 35 years, of which 19 years were as a financial planner. Maurie has overall responsibility for the financial planning operations and is focused on ensuring the needs of employers and employees are satisfied in a timely and professional matter.

Peter Hogg is a financial planner. Peter provides members with holistic and comprehensive financial planning advice. He helps them implement retirement strategies that maximise their retirement benefits and provide appropriate income in retirement. Peter has worked in the financial services industry for the last seven years.

Christine Battese recently joined FuturePlus as the Review Planner. Christine has over 17 years experience as a financial planner. Her extensive Centrelink knowledge allows her to better serve our members, enabling various strategy options to be utilised to gain optimum outcomes for our retired members.

Donna Grundy recently joined FuturePlus as a financial planner. Donna assists members with goal setting and is passionate about the industry, believing we can make a difference. She provides advice and strategies to maximise retirement capital.

Brent Piskorz joined FuturePlus at the start of 2009 as a financial planner and has over 10 years experience in the financial services industry. Brent provides members with advice and strategies to maximise their retirement benefits.

Stuart Cain is another of FuturePlus’s new recruits, having started in the Newcastle office in November 2008 in the newly created position of Associate Financial Planner. Stuart’s primary responsibilities are to manage referrals that come through the call centre and retirement seminars, booking appointments for the financial planners both in the Newcastle office and at the various council/worksites visited by the planners.

Gary McMillan is the Client Relationship Manager. Gary worked in Local Government for 15 years before joining FuturePlus five years ago. Gary’s role is to ensure employees and employers in the region are serviced through worksite visits, group talks and conducting seminars.

Sharelle Redwood is the Manager for Regional Operations Development. This role has brought her to the Newcastle office, although her duties can take her to any of our six regional offices. Her main focus is the development of regional operations and managing Regional Office leases and licensing. Sharelle will be responsible for setting up any new regional offices. She has 29 years experience in HR and financial services.

Lissa Van Eyden is the Member Services Manager for the Newcastle office. Lissa’s role focuses on the day-to-day operations of the office and on promoting the office at seminars and personal interviews. As an Authorised Representative, she is available to meet with members at the Newcastle office to assist with any enquiries they may have.

Rickie Latimore is the Newcastle office's Member Services Officer. His role is to assist members with their superannuation needs, to help in the day-to- day operations of the office and to support the other members of the Newcastle team.

When staff members join or leave

As you most likely already know, the Accumulation division of Local Government Super has established a public offer division, effectively offering the opportunity for 'lifetime' membership.

This lifetime membership capability simply means that if an employee leaves your employment, they can:

• Remain a member of LGS
• Nominate to have their new employer contribute into their Local Government Super account
• Continue to make personal contributions
• Rollover money from other complying superannuation funds into their account.

Staying with the Local Government Super will mean that members can have their super consolidated in one account and continue to receive all the benefits they currently enjoy, such as cost-effective fees and charges, financial planning advice and insurance cover (if they held it at the time of leaving employment).

It's important, therefore, that employees within the Accumulation and Retirement Schemes who leave your employment understand this opportunity and we ask for your assistance with this.

Please remember to provide departing employees with copies of the Leaving your employer? brochures. It enables an exiting employee to ask us for assistance when considering what to do with their super and includes a Choice form.

Also, don't forget to issue new employees with Choice kits. Each includes a Choice brochure, Choice form and a few promotional items.

Please contact your Client Relationship Manager if your stock of these brochures is running low, or if you have any questions about the new public offer division or how you can assist employees with their lifetime membership.

A few reminders

Paying Contributions

Employers are obliged to pay all contributions by no later than the 28th of the month following the month to which those contributions relate.

Contributions can be paid weekly, fortnightly, or monthly. Payment can be made either by:

• EFT - details can be found on our website; or
• Cheque - made out to the LG Pool A or LG Pool B, depending on the Plan, and forwarded to the Scheme Administrator.

In either case, a return, detailing the contributions paid and certain personal details of new members is to be forwarded to the Scheme Administrator. The contribution information is to be provided using the contribution file format or the contribution spreadsheet (both of which can be found in the employer section of our website), and e-mailed to the following address: employeronline@lgsuper.com.au to enable downloading of the details into the members' individual accounts.

If making payment via online banking, direct deposit or EFT notification, please ensure you advise your Employer Name or Reporting Centre Code in the reference area.

Contributions for those over age 70 years

Remember to warn employees approaching the age of 70 that you will soon no longer be able to make superannuation contributions on their behalf.

Under superannuation law, employers cannot make Superannuation Guarantee (SG) contributions on behalf of staff members after they turn 70 years of age. However, employers can contribute for those over the age of 70 if they are required to under an award agreement.

Employers should advise us of any contributions paid under an award agreement as "award" contributions when remitting contributions.

Mandated contributions, which are contributions agreed to as part of an agreement between the employer and employee, can continue to be made past age 70. Employers should advise of mandated contributions as "award" contributions when remitting contributions.

Employees aged 70 to 74 are free to make their own personal superannuation contributions from their after-tax income, or to direct their employer to make salary sacrifice contributions on their behalf.

The only requirement is that an individual making contributions must have worked a minimum of 40 hours over a period of 30 consecutive days. If they fail to meet this work test, no contributions can be accepted for that person other than mandated contributions.

A reminder about Tax File Numbers

Please remember that you are required to pass on the Tax File Number (TFN) of any new employees to us within 14 days of their start of employment.

According to the ATO, it is an offence not to provide an employee's TFN within the required timeframe.

If you do not pass on your employees' TFNs:

• You will be guilty of an offence and liable to pay a penalty.
• Your employees may have to pay extra tax (possibly 31.5% more) on the contributions.
• LGS won't be able to accept personal contributions from your employee.
• Your employee may miss out on Super Co-contribution payments.

The maximum penalty that can be imposed is 10 penalty units (currently $1,100). However, the courts may increase the maximum penalty payable by a body corporate to 50 penalty units (currently $5,500).

The maximum penalty applies for each employee, so if an employer fails to report five TFNs, five penalties can apply.

Exiting members

When completing the Employment Termination Advice (ETA) form please ensure that if you still have to remit member contributions after you forward the ETA, you answer "No" to the question: "Have all contributions for this member been paid?"

Please advise the date they are likely to be paid in the date boxes. For Div B and Div D members also advise the outstanding amount to be remitted.

When a Div B or Div D member ceases employment due to retrenchment please ensure sections 3(1) and 3(2) of the ETA form are completed.

Changed billing multiples

Remember that the billing multiples for the Retirement (Div B) and Defined Benefit (Div D) Schemes have changed.

The contribution rates required for the period commencing 1 July 2009 are as follows:

• Div B Employer Contributions: 3.8 x member contributions
• Div C Basic Benefit: 5% of Superable Salary
• Div D Employer Contributions: 3.28 x member contributions

Please make sure you remit the correct billing payments based on the new contribution rates. For those members that have reached 180 points, the Basic Benefit amount is 6.9% of Superable salary.

Note: These changes do not apply to members of Murrumbidgee Irrigation, Australian Red Cross Blood Service and Job Support.

Keep us up to date

Please keep us informed about any changes to your employer contact details or about any changes in personnel. We need to keep our contact information up to date (especially for payroll, SLOs, HR/Finance Managers, General Managers and Mayors) so that we can communicate any important information regarding LGS or administrative changes efficiently and to the right people. Any updates can be emailed to employerservices@lgsuper.com.au

Quarterly investment returns

September quarter 2009 returns for the Contributor Financed Benefit - Retirement Scheme

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

September quarter 2009 returns for the Accumulation Scheme

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

Quarterly Superannuation Guarantee (SG) Contributions

Under the SG requirements all employers 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 are 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.

* 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.