Tax and super

How super contributions are taxed

Your employer pays money into your super and your super fund taxes most of these contributions at 15%. Salary-sacrificed contributions (called concessional contributions) also attract 15% tax. This is known as 'contributions tax'. 

Give your super fund your tax file number (TFN). If you don't, your fund may deduct extra tax and may need to return contributions or co-contributions.

When a different tax rate applies

You may pay a different amount of tax in some cases. 

• If you earn $37,000 or less, the government may refund the tax paid on your concessional contributions back into your super. This is called the low-income super tax offset (LISTO).
• If your income and concessional contributions combined total to more than $250,000, you pay Division 293 tax. This adds another 15%.

Contributions from after-tax income

You can also make contributions to your super from your after-tax pay.

These payments are called non-concessional contributions because you’ve already paid tax on the money. You can contribute up to $120,000 in non-concessional contributions each financial year.

If you choose, you can claim a tax-deduction on non-concessional contributions. If you do, they’ll become concessional contributions, and you’ll pay contributions tax.

For more information on current rates and caps, or claiming a tax deduction on your personal (non-concessional) contributions, see the Australian Taxation Office (ATO) web page on tax on super contributions. 

How super investment earnings are taxed

Your super fund invests your money, and the fund pays tax on the earnings from those investments.

Investment earnings in your accumulation account are taxed at up to 15%. This includes interest, dividends, and other investment income.

Your investment earnings aren’t taxed when your money is in a retirement income account.

To learn how funds invest your money, see super investment options.

How super withdrawals are taxed

You may pay tax when you take money out of your super. How much tax you pay depends on how you take it and how old you are.

You can take your super in 2 main ways:

• as regular payments (an income stream), or
• as a lump sum.

Or you can choose to leave it in your super fund. Everyone's situation is different, especially when it comes to tax. If you're not sure, consider getting financial advice before you decide to withdraw your super.

Super income stream

A super income stream pays you money regularly over time.

• If you're 60 or over, this income is usually tax-free.
• If you're under 60, you may pay tax on these payments.

For more detail, see retirement income and tax.

Lump sum withdrawals

A lump sum gives you a one-off payment from your super.

If you're 60 or over

• You don't pay tax if the money comes from a taxed super fund.
• You may pay tax if it comes from an untaxed fund, such as some public sector funds.

If you're under 60

How much tax you pay depends on the taxable, tax-free and untaxed parts of your super.

In most cases:

• You don't pay tax on withdrawls up to the 'low rate cap', currently $260,000.
• Above this cap, you pay 17% tax (including the Medicare levy) or your marginal tax rate, whichever is lower.

If you have not yet reached your preservation age

• You pay 22% (including the Medicare levy) or your marginal tax rate, whichever is lower.

For current rates and thresholds, see the super lump sum tax table on the Australian Taxation Office (ATO) website.

When someone dies

When a person dies, their super is usually paid to their nominated beneficiary, or their Legal Personal Representative. This payment is called a super death benefit.

If you receive a death benefit, you may pay tax. The tax you pay is based on: 

• the tax-free, taxable and untaxed parts of the super
• whether you're a dependent for tax purposes
• how you take the benefit (as an income stream or a lump sum).

For more information, see super death benefits on the ATO website.

Tax rules can be complex. If you're unsure, contact the ATO or a financial adviser.