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How are super contributions taxed?

For many of us, superannuation may be our biggest asset in retirement, so adding extra to super may be a good way to boost your retirement nest egg. If you’ve ever wondered how much tax you’ll pay on contributions to super, we’ve broken it down below.

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Key takeaways:

  • Super contributions tax refers to the tax applied to concessional contributions made into a super account.
  • Concessional (before-tax) super contributions are generally taxed at 15%, though there are exceptions.
  • Non-concessional (after-tax) contributions are not subject to super contribution tax – as the name suggests, tax has already been paid on the money sourced for these contributions.
  • Both concessional (before-tax) and non-concessional (after-tax) contributions are subject to contribution caps.

A super contribution is any amount that is contributed to your super - essentially any amount added to your super balance. There are two different types of super contributions, including:

  • Concessional contributions (before-tax contributions)
  • Non-concessional contributions (after-tax contributions).

By law, your employer must pay at least 10% of your ordinary time earnings to your super account each year. These compulsory contributions known as Superannuation Guarantee or SG contributions are classified as concessional (before tax) contributions. Concessional and non-concessional contributions can be added - in addition to employer SG contributions - to boost your super balance, so you ultimately have more savings for retirement.

Concessional contributions

Concessional contributions refers to payments made to your super account pre-tax, such as in a salary sacrifice arrangement, and non-concessional contributions are voluntary contributions you make after tax from your bank account or other savings.

Concessional contributions can come from several different sources, including:

  • Employer Superannuation Guarantee amounts
  • A salary sacrifice arrangement made with your employer
  • After-tax contributions you’ve made that you elect to make tax-deductible

Find out more about concessional contributions.

Non-concessional contributions

Non-concessional, or after-tax contributions are super contributions you make from your take-home pay or savings, and can include:

  • Personal voluntary contributions
  • Spouse contributions
  • Any before-tax contributions over the before-tax contribution limit, that are treated as after-tax contributions

For more information, visit our article on non-concessional contributions.

What is the super contribution tax rate?

The tax you pay on your super contributions is dependent on whether the contribution is made before or after you pay tax on the amount, if you exceed the super contributions caps, or if you are a high-income earner.

Tax on concessional contributions

Generally, concessional contributions (pre-tax) are taxed at a rate of 15%, provided you have supplied your Tax File Number (TFN) to your super fund. This ‘concessional’ tax rate is where these types of contributions get their name and is one of the biggest benefits of super, in that 15% is likely to be lower than your marginal tax rate, so can present you with tax savings.

However, if your income is greater than $250,000, you may be subject to an additional 15% tax, meaning you could pay a total of 30% tax. The other exception is if you earn $37,000 or less – in this case, the tax you pay on super contributions is paid back into your super through the low income super tax offset or LISTO.

Tax on non-concessional contributions

Since non-concessional (after-tax) contributions have already been taxed outside of super before they are contributed to your super account, they are not subject to any further tax.

Do contribution caps apply?

Regardless of whether your super contributions are made before or after tax, they will be subject to contribution caps. The concessional contributions cap is currently $27,500 per year. If you go over this amount, your excess contributions will be taxed at your marginal tax rate.

The current non-concessional contributions limit is $110,000. If you’re 67 or under, depending on your super balance, you may be able to bring forward two years’ of after-tax super payments, allowing you to contribute up to $330,000 at once or at any time during three financial years. If you exceed the non-concessional contributions limit, the ATO will inform you. You can find out more about contributions caps on our website, or to find out about some more benefits of super, you can read our 12 benefits of super article.

Before joining Australian Retirement Trust, consider the potential loss of insurance and other benefits that you may have in your other funds. The information contained on this website is general information only and does not take into account your individual objectives, financial circumstances or needs. You should consider your own objectives, financial circumstances and needs, before making a decision about the financial product. Also, think about where your future employer contributions will be paid. You should consider the Product Disclosure Statement before deciding whether to acquire, or continue to hold the product. For more information or financial advice from Australian Retirement Trust, call us on 13 11 84.

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