Customer Education
Superannuation & Investments
Super taxation
- Tax on contributions
- Tax deduction
- Tax on investment earnings
- Tax on withdrawal
- Taxation of death benefits
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 super 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 super 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 super 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 super fund.
Any required deduction of tax will be made from your account on receipt of contributions or super rollover and will be held by the Trustee of your super fund until required to be paid to the Australian Taxation Office. Non-concessional super 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 are fully tax deductible.
Tax on investment earnings
Investment earnings of super 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
Super 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 super 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.
- Taxable component – this amount is the balance of your super 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:
Age |
Taxed element |
Untaxed element |
Aged 60 and above |
Tax free. | Up to the first $1 million1 is taxed at 15% (plus Medicare levy). The top marginal tax rate (plus Medicare levy) applies to amounts above $1 million1. |
Preservation age to age 59 |
Up to the first $140,0001 is tax free. The amount over $140,0001 is taxed at 15% (plus Medicare levy). | Up to the first $140,0001 is taxed at 15% (plus Medicare levy). Amounts over $140,000 to $1 million1 are taxed at 30% (plus Medicare levy). The top marginal tax rate (plus Medicare levy) applies to amounts above $1 million1. |
Below preservation age |
Taxed at 20% (plus Medicare levy). | Up to the first $1 million1 is taxed at 30% (plus Medicare levy). The top marginal tax rate (plus Medicare levy) applies to amounts above $1 million1. |
It should also be noted that when making a super lump sum withdrawal, if a Member has both tax free and taxable components they cannot selectively withdraw from one component but must withdraw from both components with relevant portions of each reflecting the proportions that each component makes up of the total value of the super interest.
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 super they have accumulated. The payment will be subject to a special withholding tax, to be withheld by the Fund when making any payments.
The super 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): 30%
- Taxable (untaxed element): 40%
Please note that this concession does not apply to New Zealand citizens, as they do not meet the eligibility criteria.
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, a child under 18 years (including adopted child, step-child and ex-nuptial child), any person financially dependent on you at 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.
