It’s determined by things like:

  • your age
  • your income
  • whether you’re drawing a lump sum from your super
  • the proportion of your benefit that’s coming from the taxable component of your super and the proportion from the tax-free component
  • your personal circumstances.

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 45%.1

A 15% tax rate is applied on any concessional contributions.3 

A 15% tax rate is also applicable on investment earnings in Accumulation phase. The actual tax paid may be less as a result of tax deductions and tax offsets. 

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 as lump sums when you’ve reached your preservation age (currently 56 to 60 years of age) are concessionally taxed, and subject to the low rate cap. If you’re in this age group, the low rate cap ensures the first $200,000 (for the 2017/2018 financial year) of your taxable component will not be subject to 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.

4. Tax concessions on pensions

If you’ve reached preservation age, 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. Tax applies to members over age 60 who receive a lifetime annual pension in excess of $100,000.

Your taxable component is made up of:

  • Employer contributions
  • Salary-sacrificed contributions (or contributions for which you claimed a tax deduction).

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:

Age Lump sum Income payments
60 or over Tax-free Tax-free
Preservation age (currently 56) to 60 Tax-free component: no tax
Taxable component: first $200,000 is tax free, balance at 15%4
Tax-free component: no tax
Taxable component: taxed at marginal tax rate with a 15% tax offset

 


  1. Plus any additional levies such as Medicare.
  2. From 1 July 2017, if your adjusted earnings (this is your taxable income plus any reportable fringe benefits, net investment losses and concessional contributions) is more than $250,000 a year, tax of 30% will apply to your concessional contributions.
  3. Concessional contributions include employer contributions, salary sacrificed contributions and contributions for which a tax deduction has been claimed.
  4. The low rate cap ensures that no tax is paid on the first $200,000 (2017/2018) on the taxable components of total withdrawals made before age 60. The 15% tax plus any additional levies such as Medicare applies on the taxable component over the low rate cap.