How is superannuation taxed?

The different types of tax that apply super:

Tax on contributions

Tax concessions may be available when you, your employer or your spouse add money to your super. Different rules, restrictions and tax concessions apply depending on your age and the types of contributions made (eg. personal, employer or spouse).

Some contributions attract tax at a maximum rate of 15%. Examples of these include employer contributions (such as Super Guarantee, salary sacrifice contributions) and amounts added by you into your super account for which you claim a tax deduction.  These are referred to as concessional contributions.

Some amounts paid into super are not subject to any tax when paid into super. These include personal amounts for which you do not claim a tax deduction for and spouse contributions. These types of contributions are called non-concessional contributions.

Tax on contributions exceeding the contribution caps

The Government has set caps on the amount of contributions which can be made each year on a concessional basis. Additional tax may be payable on amounts made in excess of the caps. Tax is levied on you personally and can be significant.

Concessional contributions cap	The cap is $25,000 per member per annum for the 2009/10 financial year (indexed to AWOTE in $5,000 amounts in subsequent years). For those aged 50 or over at any time in a transitional financial year (ie. 2009/10 to 2011/12 inclusive), a transitional cap of $50,000 (not indexed) will apply.
Non-concessional contributions cap	The cap is $150,000 per member per annum. People under age 65 will be able to ‘bring forward’ future entitlements to two years’ worth of non-concessional contributions, allowing up to $450,000 over a three year period to be contributed without an additional tax liability.

 

Excess concessional contributions count towards the non-concessional contributions cap and if both caps are exceeded, you may be liable for both types of excess contributions tax (equating to a total tax rate of 93%) being levied on you for the same contribution.

Depending on which cap is exceeded, you may (or must) withdraw money from your super fund to pay the tax on the excess contributions. Time limits apply for payment of this tax. The ATO will provide you with a Release Authority informing you of this liability.

You should speak to your financial adviser if you are concerned and would like to know more about the caps and the taxes which apply.

No-TFN contributions tax

Employer contributions will be taxed at an additional 31.5% by your super fund if your Tax File Number (TFN) has not been quoted to the fund by the end of the financial year in which the contribution was made. The deduction of additional tax will occur when you exit the fund or at the end of each financial year.

If you subsequently provide your fund with your TFN, you may be able to receive a refund of this tax but as the process for the fund to arrange for this to occur is lengthy, you will face significant delays in receiving the refund. 

Tax on rollovers from your super fund

Moving your super money from one super fund to another is generally referred to as a rollover. There is generally no tax payable when you rollover your super benefit from one complying super fund to another complying super fund.

Tax on money withdrawn from your super fund

Once you are eligible to access your super savings as a lump sum, any tax required to be deducted will depend on your age and the tax components within your benefit, as shown below. 

Age	Taxable component	Tax-free component
Under 55	20% + Medicare Levy	Tax free
55-59	Up to 15% + Medicare Levy	Tax free
60 or over	Tax free	Tax free

 

If the super fund does not hold your TFN and you are under age 60, tax at the highest marginal tax rate plus Medicare Levy may be deducted from all or part of your lump sum benefit.

In addition, departed temporary residents are subject to different tax rates when they withdraw their super benefits as a lump sum.

Lump sum super benefits paid as a result of death, disability or a terminal medical condition are also taxed differently, you should refer to your relevant product PDS for more information.