How is superannuation taxed?

Superannuation can be a very tax-effective way to save for your retirement for the following reasons:

• Superannuation is generally taxed at a lower rate than other investments.
• Some contributions are tax deductible for the person or company making the contribution.
• If you're receiving an income stream from a superannuation fund, the investment income and capital gains inside the fund are tax exempt.
• When you receive a superannuation payment as a lump sum or an income stream, these payments are concessionally taxed and, in some cases, tax free.

It's important that you give your tax file number (TFN) to your superannuation fund. While it's not compulsory to do so, you may pay more tax if you don't and will not be eligible to receive the government co-contribution. It's easy to give us your TFN - simply log in to MemberAccess or complete a Tax File Number Declaration Form.

 

How much tax do I pay?

Your superannuation is taxed at three stages: 

1. When it goes into the fund (contributions)
2. While it's in the fund (investment earnings)
3. When it leaves the fund (withdrawals).

Tax on contributions
Contributions into your account are taxed differently depending on the type of contribution. Employer and salary sacrifice contributions are taxed at 15%. Voluntary (after-tax) contributions and government co-contribution amounts are not taxed. However, there are limits to how much you can contribute and there are penalties if you go over these limits. See voluntary contributions for more information.

Tax on investment earnings
Any income earned on your investments is also taxed at a maximum of 15%. This amount is often reduced for our members due to the tax-effective investments we use. For example, Australian share investment may provide franking credits to us, which we then pass on to you, reducing the tax you pay on your investment earnings.

Tax on withdrawing super
The amount of tax you pay on amounts withdrawn from your superannuation depends on your age and how you want to receive your payment.

• For members 60 and over: For most members aged 60 and over, all withdrawals from your account will be tax free, regardless of whether they are taken as a lump sum or as regular pension payments.
• For members under 60: The table below outlines the tax on any withdrawals before you turn 60.

 

Superannuation benefits

	Assessable part	Tax rate*
Age 60 or over	Nil	N/A
Under age 60
Tax-free component	Nil	N/A
Taxable component
- Under preservation age	100%	20%
- Between preservation age and age 60	$0 to $165,000 Balance	$0 15%

Source: KPMG Superannuation Summary 2011/12
* These rates do not include the Medicare Levy or Flood Levy. To check your preservation age, see the page when can I access my superannuation?.

 

What happens to my superannuation if I die?

If you die, your superannuation account balance, including any insurance payment, will usually be paid to your dependant(s), unless you have nominated someone else as a binding death beneficiary.

For superannuation purposes, a dependant is:

• a spouse (married, de facto or same-sex)
• a child
• a person with whom the deceased has an interdependent relationship
• any other person who was financially dependent on the deceased just before they died.

Please note: The definition of dependant for superannuation is different to the definition of dependant for tax purposes.

Death benefits paid to someone who is classed as your dependant for tax purposes will be tax free.

Payments made to anyone other than a dependant for tax purposes may be taxed up to 30%, with the Medicare levy potentially still applying. Visit the ATO's website for more information.