Yes, your super gets taxed in a few main ways:
Tax on contributions
Tax on investment earnings
Tax on super withdrawals and retirement income payments
Tax on death benefit payments
You'll generally pay less tax on money if you add it to your super, but it depends on what type of super contribution it is and how much you earn.
Here's a quick summary of the tax on super contributions:
|Type of super contribution||Who makes the contribution||Super tax|
|Superannuation guarantee (SG) contributions1||Your employer||15%|
|Salary sacrifice before-tax contributions1||You||15%|
(a.k.a. personal, voluntary, or non-concessional contributions)
|Contributions you've claimed a tax deduction for1||You||15%|
|Spouse contribution to your spouse's super account||You||0%|
1. If your income plus super is over $250,000/year, the ATO may apply an extra 15% to some or all of your super contributions.
Super tax rates are generally lower than the tax on your pay (employment income) and the tax on investment returns outside of super (investment income).
This means super can be a tax-effective way to both save for your future and reduce your taxable income.
When you or your employer makes before-tax contributions, you might pay less tax on it than on your pay (depending how much you earn). Before-tax contributions can be:
For example, if you earn over $45,000 a year, the 15% contributions tax is less than your normal income tax rate (up to 45% + 2% Medicare Levy).
By adding some of your pay to your super before tax, you reduce your taxable income for the year.
If you add money to your super from your take-home pay, after you've already paid tax, you don't pay the super contributions tax. Find out more about after-tax super contributions.
There is a type of super contribution that's tax-deductible if you're eligible. If you add extra money to your super as an after-tax contribution, you may be able to claim a tax deduction for it.
Find out how to claim this tax deduction, and how this changes the tax on your super.
The Australian tax laws set out whether and when you have to pay tax on contributions to your super.
One thing you can do to avoid paying extra tax is to list your tax file number (TFN) in Member Online. Otherwise, you could pay up to 47% tax on the SG contributions from your employer, and any other before-tax contributions (45% + 2% Medicare Levy).
You also can't make voluntary after-tax contributions unless you list your TFN with us.
There are some limits to how much you can contribute to your super fund each year, and you could pay extra tax if you go over these limits.
Usually your super fund and employer will automatically report your super balances and contributions to the ATO.
In some cases, you may need to declare income, deductions or tax offsets from super in your return, and you can check this with your accountant or tax agent at tax time.
There are 2 main tax advantages of adding money to your super for low income earners:
There's also the government co-contribution for low incomes earners if you make after-tax contributions.
Investment earnings in your superannuation account are usually taxed at 15% (or 10% on some capital gains), which is often less than the tax rate of up to 47% on investments outside of super.
This tax is deducted from your investment income by your super fund, so you don’t need to do anything.
When you retire, if you use your super to open a retirement income stream, the investment earnings in that product are tax-free.
For tax on superannuation withdrawals, how much you pay depends on your age, whether you take the money out as a lump sum or as regular income payments, and whether it's an early withdrawal.
Withdrawing some or all of your super is called a lump sum. If you're age 60 or over, it's tax-free. If you're under 60, it depends if you're at your preservation age how much tax you pay on the taxable part of your super. Some people also have a part of their super that is tax-free at all ages.Find out more
If you're 60 or over, you usually don't pay tax when you get an income stream from your super. You can use our Retirement Income account and/or Lifetime Pension to get regular, tax-free income payments from your super, with tax-free investment earnings. If you're under 60, you may pay tax on a super income stream.Find out more
Financial hardship withdrawals are taxed as a lump sum at up to 17% to 22% if you're under 60, and tax-free over 60. For a terminal medical condition, it’s tax-free to withdraw a lump sum within 24 months. For disability payouts, it depends whether you take a lump sum or income payments.Find out more
A death benefit is when you receive someone's super and any insurance they had on their super account. The tax on this money depends on your relationship to the person who died:
If you were a dependant of the person who died (e.g. child, spouse) – under tax law, not superannuation law
If you withdraw it as a lump sum or income stream
The tax-free and taxable parts of the super
The age of the person when they died (for income streams)
Generally, your super isn't taxed when you transfer from one super fund to another. This is because the money is staying within the super industry.
This includes when you combine your super accounts into one super fund, which is called consolidating.
The exception is that tax may apply if you rollover your super from an untaxed super fund, such as a public sector fund.