Tax & super
How is super taxed?
Your super money is 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
Smart tip
Make sure you have given your tax file number to your super fund
or you could be paying too much tax.
Different contributions are taxed at different rates as they
enter your super fund.
- Employer and salary sacrificed contributions are generally
taxed at 15%. If you earn $37,000 or less the tax you have paid on
your super contributions will be automatically added back into your
super account through the Low Income Super
Contribution. If your combined income and super
contributions exceed $300,000 you will pay additional tax on your
super contributions (for more details see ATO: reduced tax concessions for high income
earners).
- Personal after-tax contributions and those received under the
government's
co-contribution scheme are not taxed.
- In most cases, when money is transferred from one super fund to
another when consolidating or switching funds, no additional tax is
payable.
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.
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 will pay will depend on whether the
fund has any 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 age 55, 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 age
55.
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: 21 Aug 2015
