How is Superannuation Taxed?

Taxes are a part of life. We pay taxes on our income, our home, and much more. You may not even realise it, but you are also taxed on your super.

There are many factors that come into play when taxing your super. It depends on several things such as:

How much money you and your employer pay into your super fund each year. There is no minimum on how much money you can put into your super but there is a maximum, which is the reason you need to start saving as soon as possible. You can put more money into your super over these limits, however you will have to pay more tax on it (around forty-seven percent).  

The source of the super payment and how it is paid. Your super is taxed differently if you pay it before income tax or after. You pay fifteen percent on contributions made before tax, such as employer or salary sacrificed super contributions. Money put into your super after tax is not taxed when put into the fund.

Death benefits can also be taxed. How much tax you pay on any death benefits you receive will depend on whether or not you are a dependent of the deceased.  If you are a dependent of the deceased, as long as you get the payment in a lump sum, you won’t have to pay tax. You may have to pay tax if you receive the benefit as a regular income stream.

Also, make sure your super fund has your tax file number so you can avoid paying more tax than you need to on your super.

When you are able to access your super, how your super withdrawal will be taxed can be complicated because it depends on your age, whether the money in your super account is tax-free or taxable, and whether you get you super as an income stream or lump sum.  It is best to speak with a tax professional to understand how your super will be taxed before you withdraw it.

For more information about how much money you can put into super each year, contact us or visit the ATO website.