From 1 July 2017 several changes to superannuation rules affecting contributions, caps and taxes will take effect. Find out more.
It’s determined by things like:
1. Lower tax on income
On your salary and other income, you pay tax at a marginal rate, which could be anything from 0% to 49%. 1
On your income in super though, you pay a flat rate of 15%2. However, super funds are taxed at a flat rate of 15% and the actual tax paid is often less because of tax deductions and tax offsets.
Super fund income includes all investment income, employer contributions, and contributions for which a tax deduction has been claimed.
2. Lower tax on capital gains
Capital gains made by a super fund are generally taxed between 10% and 15%.
3. Lower, or no, tax on lump sum payments
The amounts that you cash out when you’re aged between 55 and 60 are concessionally taxed, and subject to the low rate cap. If you’re in this age group, you can access the first $195,000 (2015/2016 financial year) of your taxable component without paying any tax. Any amount you cash out after you turn 60 is tax free.
When you start drawing a regular income from a superannuation pension in retirement, the tax incentives are even better.
Tax concessions on pensions
If you’re between 55 and 60, or totally and permanently disabled, the super paid to you will receive a 15% tax offset on the taxable portion of your pension. Once you reach 60, your pension will be paid to you tax-free.
If you're 60 or over, the lump sum payments from your Accumulation account, and the income and lump sum payments from your Income account don’t attract tax.
Your taxable component is made up of:
The tax-free component represents the total of your personal after-tax contributions (also known as non-concessional contributions). You can learn more about this by reading the Tax Explanation fact sheet.
Tax on withdrawals
When you withdraw funds, the following tax will apply:
1. Includes temporary budget repair levy of 2% and Medicare levy of 2%.
2. From 1 July 2012, if your adjusted earnings (this is your taxable income plus any reportable fringe benefits, net investment losses and concessional contributions) is more
than $300,000 a year, tax of 30% will apply to contributions.
3. A tax free limit of $195,000 (2015/2016) on taxable components applies to total withdrawals made before age 60. The 17% includes the Medicare levy of 2% (Please note that a 2% Temporary Budget Repair Levy may also apply if your taxable income is greater than $180,000 for the 2015/2016 financial year).