Tax & super
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.
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.
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 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 This is an additional 15% tax on the lesser of your concessional contributions or the amount in excess of the Division 293 income threshold.
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 public sector fund for government employees.
There are limits on how much you can contribute to super and there are penalties for going over these limits. See super contributions.
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 and 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.
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 $210,000, 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 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.
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.