Tax and Superannuation

Superannuation can feel like an opaque topic, especially when combined with tax. Understanding how your super is taxed can help you benefit from tax concessions and avoid unnecessary costs.

How is my Superannuation taxed?

Tax on super contributions depend on your personal circumstances and the type of contribution made.

The simplest way to ensure you are taxed the correct amount on your contributions is to give your super fund your tax file number.

Employer and Salary Sacrificed Contributions

Otherwise known as concessional contributions, employer and salary sacrificed contributions are taxed at 15% when received by your fund.

For low income earners, who earn $37,000 or less in a financial year, will automatically have up to $500 added back into their super accounts via the low income super tax offset (LISTO).

High income earners, whose combined income and super contributions are above $250,000, will pay Division 293 tax (an extra 15% on concessional contributions made above the threshold).

Personal Contributions

After tax personal contributions and contributions received under the governments co-contribution scheme are not taxed when put into your super fund.

Consolidating Super

Generally, no additional tax is payable when money is transferred from one fund to another. Tax may be payable if you move from an untaxed fund.

There are limits on how much you can contribute to your super, and there are penalties for exceeding these limits. It’s a good idea to stay up to date with current superannuation details via the ATO website.

How are Super Withdrawals Taxed?

Once you are eligible to access your super, you can take a super income stream to provide a regular income or simply withdraw all or part of your benefit as a lump sum.

Super Income Streams

If you are over 60 years old, your income will typically be tax-free. If you are younger than 60, you may pay tax on your super pension.

Lump Sum Withdrawals

If you are over 60 years old, any withdrawals from your super fund are tax-free. Rates may differ when dealing with untaxed funds.

When accessing super before age 60, you may need to pay tax on withdrawals. Withdrawing before your preservation age will ensure you are taxed at 22% (including a Medicare Levy) or your marginal tax rate, whichever is lower.

However, there are limited circumstances that allow access to your super before preservation age. Read more on the ATO website here.

Need to catch up on your taxes?

Online Tax Return’s team of registered tax agents can assist you to make the most of your tax return this year. Speak with us today to get started!

This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice.

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