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Customer Education

Superannuation & Investments

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Superannuation taxation

• Tax on contributions
• Tax deduction
• Tax on investment earnings
• Tax on withdrawal
• Taxation of death benefits
• Tax if you don't provide your Tax File Number

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Tax is an important consideration for all investments, but particularly so for super, which enjoys lower tax rates not available to other types of investments.

The Federal Government levies tax on superannuation in a number of different ways. The taxation implications outlined below are based on the continuation of present laws and their interpretation, and are of a general nature only. They have been prepared on the basis of current information available.

You should consult a professional tax adviser or financial adviser for information specific to your circumstances regarding any tax implications of investing in or contributing to super.

Tax on contributions

All contributions for which a personal tax deduction is claimed and all employer contributions are generally taxed at a rate of 15%. In addition, any superannuation rollover that contains a taxable component which is made up of an untaxed element that is rolled over into the Fund is liable for tax. Receiving superannuation funds deduct 15% tax on only the first $1,000,000 of the untaxed element of the taxable component to be transferred. The remaining amount will be taxed at the top marginal tax rate plus the Medicare levy by the untaxed transferring superannuation fund.

For more information about concessional and non-concessional contributions caps, refer to the 'How to contribute to superannuation' module .

Any required deduction of tax will be made from your account on receipt of contributions or superannuation rollover and will be held by the Trustee of your superannuation fund until required to be paid to the Australian Taxation Office. Non-concessional superannuation contributions do not attract contributions tax.

Tax deductions

Concessional contributions (employer contributions including superannuation guarantee and salary sacrifice) and personal contributions made by the self employed (for which they intend to claim a tax deduction) are fully tax deductible.

Tax on investment earnings

Investment earnings of complying superannuation funds (in the accumulation or wealth creation phase) are taxed at a maximum rate of 15%. The tax is paid by the fund and in certain circumstances the rate of tax may be reduced by dividend imputation, the capital gains tax discount (33.33%) and expenses deductible to the fund.

Tax on withdrawal

Superannuation withdrawals (apart from withdrawals made by people who hold an eligible temporary resident’s visa and are permanently departing Australia) are generally referred to as superannuation lump sum payments and have two different components which are taxed differently on withdrawal. These components and their tax treatment are shown below.

• Tax free component – this amount is tax free when taken as a lump sum.
• Taxed component – this amount is the balance of your superannuation benefit after deducting the tax free component. The tax treatment of this component depends on your age at the date of withdrawal, the amount withdrawn and whether the benefit consists of untaxed or taxed elements as follows:

Component of benefit	Age of person at the date the payment is received	Portion subject to PAYG withholding tax	Rate of withholding tax (including Medicare levy)
Tax free component	All ages	Whole of tax free component	0%
Taxed component (taxed in the Fund)	Aged 60 and over Preservation age1 to age 59	Whole of taxable component Amount up to low rate cap of $150,0001 Amount over low rate cap of $150,0001	0% 0% 16.5%
	Under preservation age	Whole of taxable component	21.5%

People who have entered Australia on an eligible temporary resident’s visa and who subsequently permanently depart Australia following the cancellation or expiration of their visa are able to receive payment of any superannuation they have accumulated. The payment will be subject to a special withholding tax, to be withheld by the Fund when making any payments.

The superannuation payments will consist of tax free components (which are not subject to taxation when withdrawn) and/or taxable components. The tax rates applicable to the taxable components are:

• Taxable (taxed element): 35%
• Taxable (untaxed element): 45%

Please note that this concession does not apply to New Zealand citizens, as they do not meet the eligibility criteria.

For more information on superannuation for temporary residents please click here

Taxation of death benefits

All lump sum death benefits are tax free if paid to a dependant (for tax purposes). Lump sum death benefits paid to non-dependants (for tax purposes) are taxed at 15% plus the Medicare levy (for elements taxed in the Fund) or taxed at 30% plus the Medicare levy (for elements untaxed in the fund such as insurance proceeds).

A dependant for tax purposes means your legal or de facto spouse or other person with whom you are living together on a genuine domestic basis as a couple (including same-sex couples), a child under 18 years (including adopted child, step-child, ex-nuptial child or child of a member's spouse), any person financially dependent on you on the date of your death and a person with whom you have an interdependency relationship.

What is an interdependency relationship?

An interdependency relationship is defined as where two people (whether or not related by family):

• live together
• have a close personal relationship
• one or each of them provides the other with financial support, and
• one or each of them provides the other with domestic support and personal care.

An interdependency relationship can also exist where there is a close personal relationship between two people who do not satisfy all other criteria for interdependency because either or both of them suffer from a physical, intellectual, or psychiatric disability.

Tax if you don't provide your Tax File Number

The Superannuation Industry (Supervision) Act 1993 allows the trustee of a superannuation fund to collect your Tax File Number (TFN). It is not an offence if you do not provide your TFN but if we do not hold your TFN, the following may apply:

• your insurance cover could lapse as we are unable to accept personal contributions to pay for insurance and/or your contributions may not be enough to cover premiums due to the extra tax being applied to the contributions
• you will not be able to make personal or spouse contributions to your superannuation policy employer and salary sacrifice contributions will be taxed at 46.5% (an additional 31.5% on top of the existing 15% contributions tax)
• you will miss out on the Government co-contribution
• for pre 1 July 2007 members, concessional contributions of up to $1,000 will be taxed at 15%. For concessional contributions in excess of $1,000, the whole amount will be taxed an additional 31.5%; and
• if you receive a benefit under the age of 60, your benefit may be taxed at the top marginal rate. If the TFN has not been provided to TOWER and additional tax has been deducted, please contact us about claiming the tax back from the ATO. TOWER will claim a refund of this tax from the ATO for current members who provide a valid TFN. In order to qualify for the ATO refund, you must lodge the claim within three years of the end of the financial year in which the contributions were made. This service is not extended to members who have previously left the Fund.

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