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.
How super
contributions are taxed
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
to avoid paying more tax on your super.
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 tax offset
(LISTO).
High income earners
If your combined income and super contributions exceed $250,000
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.
Personal contributions
After-tax personal contributions and those received under
the government's co-contribution scheme
are not taxed when they are put into 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 are 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.
See the ATO website for more details on the changes to super from 1 July 2017.
How investment
earnings are taxed
Income which is earned in the fund (investment earnings) is
taxed at a maximum rate of 15%. Capital gains on assets held
for 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
an average of 7% tax because its dividend income entitles it
to tax credits.
How
super withdrawals are taxed
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 on our retirement income and
tax page. 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.
If you access your super before age 60 you may pay tax on
withdrawals. You can withdraw up to the low rate threshold,
currently $200,000, 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 a financial
adviser.
Related links
Last updated: 01 Jul 2017
