Upcoming superannuation changes

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:

  • your age
  • 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 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:

  • Employer contributions
  • Salary-sacrificed contributions (or if you’re self-employed, 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 $195,000 is tax free, balance at 17%3
Tax-free component: no tax
Taxable component: taxed at marginal tax rate with a 15% tax offset

 

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).