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Tax and super

Tax benefits that can save you money

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When you retire, your superannuation is likely to be an important, and possibly main, source of income. That’s why it’s a good idea to top it up while you’re still working. 

But did you know, there are also some excellent tax benefits you can take advantage of right now – just by making your own voluntary superannuation contributions?

There are two main ways to add to your super:

  1. Before-tax contributions through an agreement with your employer. This is called salary sacrificing
  2. After-tax contributions from your take-home pay

Do I pay tax on super?

In most cases, yes – but usually at a lower rate than your regular income tax.

Super can be taxed at three possible stages:

  1. When your employer makes a super contribution, or when you make a before-tax contribution: 15% tax
  2. As your super investments grow (tax on earnings only): 15% tax
  3. If you are eligible and withdraw money from your super account before you turn 60 years of age (but remember once you turn 60 your pension payments are tax free).

The good news is, the superannuation tax rates are often a lot less than regular tax on income and normal investment earnings. These are called superannuation tax concessions.

Tax on withdrawals from your superannuation

When you become eligible to access your super account, you have a range of options: Leave the funds where they could grow until you need the money; take all or some of it out as a lump sum; or have your fund pay you a regular income stream.

In each case, if you’re aged 60 years or over, your super withdrawals are usually tax-free.

If you withdraw your super before you turn 60 – either as a lump sum or as an income - then you will probably have to pay tax - so first check when you can access your super.

Special conditions that may apply to you

If you earn less than $37,001 per year, you will have up to $500 of the tax you paid on your concessional super contributions refunded into your super account by the Australian Taxation Office through the Low Income Tax Offset (LISTO).

If you earn more than $250,000 per year (including super contributions), then you may have to pay more tax on your super due to reduced tax concessions for high-income earners.

You may also be required to pay extra tax if you contribute too much to your super. For more information head to the contributions tax cap page.

Tax is not paid on certain super transactions including:

  • Government co-contributions
  • Transferring from one super fund to another
  • Consolidating multiple super accounts into a single account

Tax rates for superannuation

Activity Tax Rate  
Employer contributions 15% If you earn less than $37,001 per year, up to $500 of the tax paid on your concessional super contributions will be refunded into your super account.
Salary sacrifice and other super contributions you’ve claimed a tax deduction on 15%  
Voluntary after-tax contributions Not taxed These contributions are not taxed because it is from your after-tax earnings or take home pay.
Government co-contributions Not taxed  
Transferring or consolidating your super Not taxed  
Super fund investment earnings 15%  
Exceeding $250,000 income and super contributions per year 30%  
Withdrawing money from your super fund at 60 or above Not taxed  

Remember you can be taxed more if you exceed the contribution cap.