How super is taxed?
Super is a tax-friendly way to save for retirement as it’s generally taxed at a lower rate than your regular income.
Keep in mind the information below does not cover everyone’s situation. Everyone’s situation is different and we recommend you seek advice from a tax accountant or one of our Financial advisers (financial advice is included in your membership)1.
Do you pay tax on super contributions?
Yes, you may have to pay tax on super contributions.
The amount of tax you pay depends on the type of contribution, how much your total super balance is, your age and whether you are in the accumulation or retirement phase.
Superannuation is generally taxed at three stages:
- when contributions are made to your super account
- when your investment earns money
- when you withdraw your funds from your super
If you earn $37,000 or less annually, you may receive the government low income super tax offset (LISTO).
Tax on super contributions
There are two types of superannuation contributions:
Before-tax (concessional) contributions
Before-tax contributions (which includes salary sacrifice) can help you save for retirement by growing your super at a lower tax rate.
What is the tax on before-tax contributions?
Before-tax contributions are generally taxed at 15%. These contributions mare made up from:
- employer super guarante contributions
- salary sacrifice contributions
- personal after-tax contributions made by you, but have claimed as a tax deduction
If you make personal after-tax contribution to your super fund from your after-tax income and then lodge a valid notice of intent to claim a deduction, those contributions become concessional.
When you claim a tax deduction for your after-tax contributions in your tax return, and they will be taxed at 15% in your super fund, rather than your marginal income tax rate.
After-tax (non-concessional) contributions
After-tax contributions (contributions made from your after-tax income) are not taxed, as you have already paid tax on your income.
|
|
Type of contribution |
Tax rate |
Contribution caps |
|---|---|---|---|
|
Before-tax (concessional) contribution |
Employer contributions |
15% |
$32,500 concessional contribution cap |
|
Salary sacrifice |
15% | ||
|
Personal deducted contributions |
15% | ||
|
Division 293 |
An additional 15% tax on your taxable contributions |
For individuals whose combined income and contributions are great than the Division 293 threshold of $250,000 p.a. | |
|
After-tax (non-concessional) |
Personal contributions |
Tax free |
$130,000 non concessional contribution cap |
|
Spouse contributions |
Tax free | ||
|
Government super co-contribution |
Tax free | ||
|
Downsizer contributions |
Tax free |
Up to $300,000 per person (one-off contribution) | |
- a higher concessional contribution cap may apply if you’re eligible using the carry-foward rule.
- a higher non concessional contribution cap of up to $390,000 may apply if you’re eligible using the bring-forward rule.
What happens if you exceed your contribution caps?
- Excess concessional contributions: If you contribute more than your concessional contributions cap, the excess amount will be added to your taxable income and taxed at your marginal tax rate. A 15% tax offset applies because your super fund has already paid tax on these contributions.
- Excess non-conessional contributions: If you exceed your non-concessional contributions cap and choose not to withdraw the excess amount, it may be taxed at up to 47%.
You can speak with a First Super financial adviser who can help you maximise your superannuation contribution caps and discuss any tax implications. This is included in your membership.
Tax on investment earnings
Tax on superannuation accounts during accumulation phase
Investment earnings within your superannuation fund are generally taxed up to 15%.
Tax on investment earnings in retirement
If you are:
- over the age of 60 and fully retired or
- aged 65 and over
- and switched your super to an account based pension such as our Retirement Income account
- and have a total balance under $3 million
your investment earnings will be tax-free.
Tax on investment earnings on large balances
An additional tax on investment earnings will be applied to superannuation accounts or account based pensions if the total super balance (TSB) is $3 million or more.
|
Your account balance at 1 July |
Investment earnings tax rate |
|---|---|
|
Account balance under $3 million |
15% (or tax-free with an account based pension) |
|
$3 million and above to under $10 million |
Additional tax of 15% |
|
$10 million and above |
Additional tax of 10% |
Tax on super withdrawals
How much tax you pay on super withdrawals depends on:
- your age
- whether you withdraw all your super as a lump sum or as an income stream
- how much of your super is in a tax-free component or taxable component
Generally, if you withdraw any part of your super over the age of 60, no tax is payable.
|
Your age |
Tax on lump sum withdrawals |
Tax on income streams |
|---|---|---|
|
60 or over |
Tax-free |
Tax-free |
|
Under 60 |
Your income has two components: |
Your income has two components: |
Taxable component
The taxable component comes from conessional contributions:
- super payments made by your employer
- salary sacrifice contributions
- personal contributions you’ve claimed as a tax-deduction
Tax-free component
Tax-free component comes from non-concessional contributions:
- non-concessional personal contributions which you haven’t claimed a tax deduction for
- government super co-contribution
- government payments from the low-income tax offset (LISTO)
Taxes may apply if you withdraw money from your super early:
- Financial hardship: If you’re under 60 years old, this is generally taxed at between 17% and 22%. If you’re over 60 years old, you won’t be taxed unless the lump sum includes an untaxed element.
- Compassionate grounds: If you’re under 60 years old, the taxable portion of the lump sum is taxed at the lower of your marginal tax rate or 22% (including the Medicare levy). If you’re over 60 years old, the withdrawal is generally tax-free.
- Terminal medical condition: withdrawal is tax-free
- Retirement Income account: withdrawals from your Retirement Income account are tax-free.
We’re here to help, so get in touch.
If you you need help understanding super and how it is taxed, contact our Member Services Team on 1300 360 988, or email us.
1 fees apply for compehensive advice