Tax & super
How is super taxed?
Your super money can be taxed at three stages: when it
goes into the fund (contributions), while it is in the fund
(investment earnings) and when it leaves the fund (super
benefits).
Understanding how your super is taxed can help you benefit from
tax concessions and avoid costly mistakes.
Tax on
contributions
The amount of tax you'll pay on your super contributions depends
on the type of contribution and your personal circumstances.
Employer and salary sacrificed contributions
Also known as concessional contributions, employer and salary
sacrificed super contributions are taxed at 15% when they are
received by your super fund.
Smart tip
Make sure you have given your tax file number to your super fund
or you could be paying too much tax.
Low income earners
If you earn $37,000 or less the tax you have paid on your super
contributions, up to $500, will be automatically added back into
your super account through the low income super
contribution. From 1 July 2017 this will be replaced by the Low
income super tax offset contribution (LISTO).
High income earners
If your combined income and super contributions exceed $300,000
you will pay Division 293
tax. This is an
additional 15% tax on the lessor of your concessional
contributions or the amount in excess of the
Division 293 income threshold. This threshold will reduce to
$250,000 on 1 July 2017.
Personal contributions
After-tax personal contributions and those received under
the government's co-contribution
scheme are not taxed when entering your super fund.
Consolidating super
In most cases, when money is transferred from one super fund to
another when consolidating or switching funds, no additional tax is
payable. Tax may only be payable if you were moving from an untaxed
fund, such as an older style government fund.
There are limits on how much you can contribute to super and
there are penalties for going over these limits. See contributing extra to
super.
For more information about the changes to super from July 2017,
see the super changes page on the ATO's website.
Tax on investment
earnings
Income which is earned in the fund (investment earnings) is
taxed at a maximum rate of 15%. Capital gains longer than 12
months within the fund will be taxed at 10%.
The amount of tax your fund pays can be reduced by tax
deductions or tax credits. For example, a growth fund may only pay
7% tax because its dividend income entitles it to tax credits.
Tax on
withdrawals
When you become eligible to access your super you can take a
super income stream to provide you with a regular income, or you
can withdraw all or part of your benefit as a lump sum.
Super income streams
The tax treatment of super income streams is covered in detail
in retirement income and tax.
If you are aged 60 or over your income will usually be tax-free. If
you are under age 60 you may pay tax on your super pension.
Lump sum withdrawals
If you are aged 60 or over any withdrawals from a taxed super
fund are tax-free. Different rates may apply to untaxed funds, such
as government super funds.
Smart tip
Taking all your super out as a lump sum when you retire may not
be a good idea. You should speak to a financial adviser to
find out the best way to take your super.
If you access your super before age 60 you may pay tax on
withdrawals. You can withdraw up to the low rate threshold,
currently $195,000, tax-free. This is a lifetime limit and is
indexed annually. The threshold does not include the tax-free
portion of your super account, which will be returned to you
tax-free. Any amounts over the low rate threshold will be taxed at
17% (including Medicare Levy) or your marginal tax rate, whichever
is lower.
If you are withdrawing a lump sum from super and are younger
than your preservation age, the lump sum will be taxed at 22%
(including Medicare Levy) or your marginal tax rate, whichever is
lower. There are limited circumstances under which you can access
super before your preservation age.
Find out your preservation age.
Super and
pension age calculator
While you can access a lump sum this may not necessarily be the
best strategy for you. We recommend you seek financial
advice before making a decision to withdraw funds
from your super.
For detailed information on how other lump sum benefits are
taxed, see the ATO's web pages on lump sum withdrawals and death benefits.
Tax and super is a complex area and we
recommend that you seek help from a tax professional or financial
adviser.
Related links
Last updated: 20 Jun 2017
