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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).
BSc. Econ, BCom, MBus
Authorised Representatives of Millennium Three Pty Ltd
ABN 61 094 529 987
AFSL 244252
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.
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.
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).
If your combined income and super contributions exceed $250,000 you will pay Division 293 tax. This is an additional 15% tax on the lesser of your concessional contributions or the amount in excess of the Division 293 income threshold.
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.
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.
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.
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 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.
While you can access a lump sum this may not necessarily be the best strategy for you. We recommend you get in touch before making a decision to withdraw funds from your super. Give us a call today or enter your details below to get in touch.
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Perspective Wealth Management Pty Ltd
ACN 639 529 749
Trading as Luck Financial Group is a corporate authorised representative of Millennium3 Financial Services Pty Ltd
ABN 61 094 529 987 – AFSL 244 252
The information displayed on this communication is a summary only and should not be construed as investment advice or securities recommendations. It is prepared for general information and not having regard to any particular persons investment objectives, financial situation or needs. No recommendation (express or implied) or other information should be acted on without obtaining professional advice. You are encouraged to consult a financial planner before making any decision as to how appropriate this information is to your objectives, financial situation and needs. Also, before making a decision, you should consider the relevant Product Disclosure Statement available from your financial planner. This website is for Australian residents only.
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