The tax benefits of super

While there are rules around when you can access it, as an investment, super can give you tax advantages – both before and during retirement.

• Low or no tax on your contributions
• Low or no tax on the earnings your money makes
• Low or no tax on your withdrawals
• Tax offsets and deductions to give you more money today, or help you save more for retirement.

Tax advantages of super while you're working

• Pay less tax
  Super contributions made before-tax (concessional contributions), including those made by employers, are taxed at 15%¹ – generally lower than your marginal income tax rate, which could be as high as 47%.² If you earn more than $45,000 per year, salary sacrificing into your super could be an effective way to reduce your taxable income. Because the extra payments are taken out of your salary before you’ve paid income tax, you only pay 15% tax on them. If you are a low-income earner, you could consider making after-tax contributions instead as you may be eligible for the Government co-contribution.
• Claim a tax deduction
  Any voluntary after-tax (non-concessional) contributions you make to your super fund are not taxed.³ Because you've already paid income tax on this money, you might be able to claim a tax deduction – potentially reducing your taxable income and putting more in your pocket at tax time.⁴
• Lower tax on investment earnings
  As an individual, income you receive from investments in your own name (outside of super) will generally be taxed at your marginal rate, which could be as high as 47%. When your money is invested in super, your super fund pays the tax on these types of assets on your behalf, generally at a lower rate of 15% on investment earnings and 10% on some capital gains.

Additional tax advantages for low-income earners and spouses

• If you earn less than $37,000 in the financial year and are eligible, the Australian Government refunds the tax on any before-tax contributions, up to a maximum of $500. This is known as the low income super tax offset (LISTO).
• If your spouse earns less than $40,000 a year and you make after-tax contributions to their super, you may be able to claim a tax offset of up to $540. This is called a spouse super contribution.

Tax advantages of super in retirement

• No tax on payments and withdrawals from your super
  After you turn 60, any money you take out of your super – either as a pension or a lump sum – is usually tax-free.
• Tax-free retirement income from your super
  You can use a Retirement Income account to receive a regular income from your super. There is no tax on income payments or lump sum withdrawals after 60, and you also get the benefit of tax-free investment earnings and capital gains while your money stays invested.

For more information on how superannuation is taxed, read our Tax Explanation factsheet.