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 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:
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: