How is my super taxed?

Saving for retirement is imperative, and one way to achieve this is by contributing to a superannuation fund. To encourage the culture of saving, super is subject to different tax rules. Let us break it down for you.

How Super is Taxed – The Basics

Usually, super is taxed at three focal points: when it goes into the fund (contributions); while it is in the fund (investment earnings); and when you make a withdrawal (super benefits).

Contributions

Tax on your super contributions generally depends on the type of contribution and how much you contribute to your super. Contributions you make using before-tax income, otherwise known as ‘concessional contributions’, are taxed at 15%. However, limits apply, and any contribution amount above the yearly cap limit is included in your income tax assessment and taxed at your marginal tax rate. For the 2018/2019 financial year, the concessional contributions cap limit is $25,000 per annum.

On the other hand, contributions from after-tax income (‘non-concessional contributions’) are not taxed in your super fund – since you have already paid tax on this income. However, similar to concessional contributions, cap limits apply. Any contribution amount exceeding the yearly cap limit may be subject to a penalty tax. For 2018/2019 financial year, the non-concessional contributions cap limit is $100,000 per annum.

Investment earnings

Investment earnings on your super are taxed at a maximum rate of 15%. This tax is deducted from your super fund’s investment earnings before they are added to your super account.

Super benefits

Tax on your super benefits depends on a number of factors, such as your age and whether your super comes from a taxed or untaxed source. Tax on both super and death benefits is also affected by whether the benefits are paid as a lump sum or income stream (regular payments).

Please contact us if you would like more information about how super is taxed or making extra contributions to boost your super savings.