As a not-for-profit fund built from the ground up to suit the unique needs of Qantas Group staff, we exist entirely for the benefit of members and our members guide everything we do.

These values are underpinned by our commitment to exemplary governance and transparency. This regulates how objectives are set and achieved, how risk is monitored and assessed, and how performance is optimised. As part of our commitment, we are proud to be a signatory to the Voluntary Tax Transparency Code.

What is the Voluntary Tax Transparency Code?

The Voluntary Tax Transparency Code (VTTC) is a set of principles and ‘minimum standards’ developed by the Board of Taxation and administered by the Australian Taxation Office (ATO) to guide the public disclosures of tax information. The VTTC is designed to encourage greater transparency and improve the public’s understanding of how institutions and businesses comply with Australia’s taxation laws.

This is Qantas Super’s first Tax Transparency Report as a signatory to the VTTC and covers the 2019/20 financial year.

Superannuation and taxes

The superannuation system is one of the three pillars of the Australian government’s retirement income policy.

In recognition of both the important role super plays in the Australian economy and its long-term nature, super funds and the benefits they pay are subject to a special tax regime.

For example:

  • Super funds generally pay tax at a rate of 15%
  • Special rules apply to effectively tax some capital gains at 10%
  • Income related to assets supporting pension payments is exempt from tax
  • Super funds benefit from the imputation system, getting a credit against the tax they owe for the tax already paid by companies paying dividends
  • Where a super fund pays taxes on foreign income to foreign governments, it may get a credit against Australian tax for the foreign taxes paid; this helps avoid the fund being taxed twice on the same income

As a result of this special tax regime, a super fund’s effective tax rate will depend on a number of factors, including the mix of assets the fund holds and how many of its members are drawing down pensions.

Our approach to tax strategy and governance

The ultimate responsibility for the management of risk sits with the Qantas Super Board, with the Board establishing specialist committees to help with this work. One of these is the Audit and Risk Committee (ARC), which provides oversight for the management of tax risk.

The ARC has approved a Tax Risk Management and Governance Framework (“the Framework”). The Framework helps us manage or avoid the risk of non-compliance with tax law.

Our objectives for managing tax risk include:

  • Complying with all relevant legislation and meeting tax obligations in a timely manner
  • Maintaining a cooperative relationship with the ATO and other revenue authorities both domestically and internationally
  • Maintaining a risk profile with revenue authorities that is in accordance with Qantas Super’s risk appetite
  • The protection of Qantas Super’s reputation in relation to tax matters

At Qantas Super we are committed to fully complying with and meeting our obligations under tax laws and seek to manage our taxes in an open and consultative manner with all tax authorities.

Qantas Super as a taxpayer

Qantas Super is a significant taxpayer, paying around $46.1 million in income tax in the 2019/20 financial year.

The following table shows the types of taxes paid by Qantas Super:

Type of tax paid - FY2019/20
$'million
Income tax - Fund
46.1
Employment Taxes – FBT & Payroll Tax
0.4
Taxes relating to employee salaries
1.9
Net GST paid/not recovered
1.7
Taxes relating to member benefit payments
1.5

Income tax expense

Not all amounts recognised as income in a fund’s financial statements will be treated as income for tax purposes, nor will all expenses be deductible for tax purposes.

To calculate our taxable income, or the amount on which Qantas Super must pay tax, we take our ‘accounting income’ and adjust for a variety of items that tax law treats differently. Because of the tax rules that apply to super funds, our income tax expense will usually be lower than the tax rate applied to accounting income.

Prima facie tax expense

The following table shows prima facie tax expense, or the tax rate for super funds (15%) applied to accounting income. Adjustments are then made to this number to determine our income tax expense.

Reconciliation of accounting income to income tax expense - FY2019/20
Income statement
$'million
Change in member benefits
$'million
Total
$'million
Accounting income before income tax
 (56.5)
 385.7
 329.1



Prima facie income tax expense (at 15% applied to the accounting net result)
(8.5)
57.9
49.4
Adjusted for the tax impact of the following items
Non-taxable member contributions and rollovers in
-
(20.1)
(20.1)
Life insurance premiums
-
(4.2)
(4.2)
Tax-exempt pension income
(2.8)
-
(2.8)
Franking credits and FITOs
(25.0)
-
(25.0)
Other assessable investment income / non-deductible amounts
13.6
-
13.6
Under/(over) provision relating to prior years
-
(3.7)
(3.7)
Income tax expense
(22.7)
29.9
7.2
Effective rate of income tax (prima facie tax expense adjusted for by non-assessable/non-deductible amounts)
2.2%*

*Effective tax rate is lower in the current year predominantly due to accounting losses from investments, refundable franking credits and non-taxable member contributions.

Income tax expense is not the amount of tax paid to the ATO in that year, as actual income tax paid will differ from income tax expense on accounting income. This is because the timing of when income and expenses are recognised is different for accounting and tax purposes as a result of the requirements of accounting standards and tax law rules.

Reconciliation of income tax expense to tax paid – FY2019/20
Income statement
$'million
Change in member benefits
$'million
Total
$'million
Income tax expense
(22.7)
29.9
7.2
Under/(over) provision for tax current year
(1.8)
0.4
(1.4)
Net unrealised investment losses
34.1
-
34.1
Accrued income and expenses
2.6
(0.1)
2.5
Over/(under) provision relating to prior years
-
3.7
3.7
Income tax paid
12.2
33.9
46.1

Global investment and taxes

Qantas Super invests internationally in order to help diversify investment risk and maximise returns to our members. Our international investments are in listed and unlisted markets, and across all asset classes. As a result, Qantas Super pays taxes in foreign jurisdictions. The amount of foreign tax paid in the FY2019/20 year was $7.1 million.

Qantas Super pays these foreign taxes in the countries where the investments are located.  A tax offset is claimed in Australia for eligible foreign taxes paid.

From time to time, we will also invest in vehicles domiciled in low or no-tax jurisdictions, with many well-regarded international investment managers choosing to base their funds in such locations for a variety of commercial and legal reasons. The low or no-tax country provides a tax-neutral platform where an investment manager can aggregate investor funds from all over the world, and avoids a possible third layer of tax on investment income.