How super is taxed
Generally, when you contribute to your superannuation fund, you won’t see that money for a long time. Because of this, and to encourage you to save for your retirement, your superannuation is taxed differently to your personal income.
Investment earnings within your superannuation fund are generally taxed at 15%. Assets backing pensions are exempt from this tax rate.
The tax you pay on withdrawals from your superannuation fund depends on how you withdraw it, how long you have held a superannuation account and how old you are.
Your superannuation is also subject to tax at three different points: when you contribute; when your investment earns money; and when you withdraw your funds.
The tax you pay on contributions depends on how and when you contribute to your super. Concessional contributions (contributions made from your pre-tax income, including the superannuation guarantee, salary sacrifice, any other employer contributions and contributions claimed as a tax deduction) are generally taxed at 15%.
A concessional contributions cap (limits) applies to these sorts of contributions. If you exceed the cap in any financial year, the amount over the cap will be taxed at your marginal tax rate. The concessional contributions cap for the 2016 – 2017 financial year is:
- $30,000 for those under age 49 on the last day of the previous financial year
- $35,000 for those age 49 and over on the last day of the previous financial year.
The concessional contributions cap for the 2017-2018 financial year will be $25,000 for all individuals regardless of age.
Non-concessional contributions (contributions made from your post-tax income) do not generally attract tax, as you have already paid tax on your income. However, a non-concessional contributions cap applies. The concessional non-contributions cap for the 2016 – 2017 financial year is:
- $180,000 per annum; or
- $540,000 in a rolling three-year period under the bring forward provision.
If you exceed the above limits; you have the choice to release the excess contributions (plus any interests) or leave them in the fund and you may be subject to penalty tax of up to the highest marginal tax rate.
The tax you pay on withdrawals is detailed in the Product Disclosure Statement. You may also wish to speak to a First Super Financial Planner to discuss your plans to access your superannuation, and any tax implications.
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If you’d like to discuss the taxation of your superannuation, or if you have any other questions, please don’t hesitate to call our Service Centre on 1300 360 988, or email us.