How super is taxed

There are three main types of tax applied to your super:
  1. Contributions tax: paid on your before-tax super contributions
  2. Investment tax: paid on your investment earnings
  3. Tax on withdrawals: paid on super withdrawals
Read on to find out how tax relates to your super and how you can make sure you’re not paying more tax on your super than you need to.

Tax on super contributions

When you or your employer contribute to super, you’ll pay tax on those contributions. The amount of tax you’ll pay depends on:

  • whether you’re making a before-tax or after-tax contribution
  • your income or how much you earn
  • whether you’ve supplied your Tax File Number or not (you can supply your TFN securely here)
  • whether or not you’ve stayed within the relevant contribution caps

Tax on before-tax (concessional) contributions

Before-tax contributions include employer contributions (and any insurance costs or administration fees they pay for you), salary sacrifice contributions you make and any after-tax contributions you make that you claim a tax deduction for.

There’s a $25,000 limit (concessional contributions cap) on how much you can contribute to your super before tax. This limit includes your employer contributions and personal before-tax contributions you make.

The table below, outlines taxes payable on before-tax super contributions, depending on your personal circumstances:

Your income Less than $250,000 pa More than $250,000 pa
Tax on before-tax contributions with TFN supplied: 15% 30%*
Tax on before-tax contributions if no TFN is supplied: 47% 47%
Concessional contribution cap $25,000 $25,000  
*If your adjusted taxable income (including your before-tax contributions) is more than $250,000 per year, your before-tax contributions will be taxed at 30%, to that extent. This is known as division 293 tax. Find out more at ato.gov.au/rates/key-superannuation-rates-and-thresholds/

From 1 July 2019 you can use the unused portion of the concessional contributions cap from up to five previous financial years, if your total superannuation balance is less than $500,000 on 30 June of the previous financial year. For example, if your concessional contributions in the 2019/2020 financial year totalled $15,000, you could carry the additional $10,000 over to the 2020/2021 financial year which means you can contribute up to $35,000 under the concessional cap in the 2020/2021 financial year.

What happens if you go over the concessional contributions cap?

If you go over the concessional contributions cap, the excess contributions will get taxed at your marginal tax rate, plus Medicare levy and incur an interest charge. You can withdraw up to 85% of your excess contributions, but they will still be taxed at your marginal tax rate less a non-refundable tax offset of 15% (because you have already paid tax on this money), plus Medicare levy and the interest charge. Any excess before-tax contributions not released count towards your after-tax contributions cap.

See the ATO website for detailed information on the concessional contributions cap.

Tax on after-tax (non-concessional) contributions

After-tax contributions (also known as voluntary super contributions) are extra super contributions you make from your take-home pay, including any contributions you make for your partner. You can only make after-tax contributions if we have your tax file number.

When you make after-tax contributions to your account, your contributions aren’t generally taxed because you have already paid income tax on them. The only time you may have to pay tax on your after-tax contributions, is if you exceed the non-concessional contributions limit and do not choose to withdraw any excess, in which case you could pay up to 47% on any amounts over the limit. The associated earnings withdrawn are taxed at your marginal tax rate. You will also be entitled to a 15% non-refundable tax offset of the associated earnings included in your assessable income.

The current non-concessional contributions limit is $100,000 per year. Depending on your age and super balance, you may be able to bring forward up to three years’ or $300,000 worth of excess non-concessional contributions. This is known as the non-concessional contributions bring-forward period. See the table below:

Non-concessional contributions bring-forward period§
Total superannuation balance on 30 June 2020 Non-concessional contributions cap for the first year Bring-forward period
Less than $1.4 million $300,000 3 years
$1.4 million to less than $1.5 million $200,000 2 years
$1.5 million to less than $1.6 million $100,000 No bring forward period, general non-concessional contributions cap applies
$1.6 million or more Nil n/a
§ You must be under age 65 during the financial year you first contribute more than $100,000. The Federal Government has proposed increasing the age limit for contributions made under non-concessional bring-forward rules to age 67. These changes have not been legislated at the time of publication. We recommend you check ato.gov.au/Super for the latest updates on non-concessional bring-forward rules. Source: ato.gov.au.


Tax on spouse contributions

Spouse contributions are treated as after-tax (non-concessional) contributions and form part of your spouse’s after-tax contributions cap.

A tax offset of up to $540 may be available for up to $3,000 of superannuation contributions you make for a non-working or low-income spouse. Note: any contributions you split from your super account to your spouse are exempt from the tax offset. Conditions apply, find out more here.

 

Tax on investments

Your investment earnings (such as interest, dividends, rental income etc.) in superannuation are generally taxed at 15%, while you’re working and growing your super. Investment earnings are not taxed if you are fully retired and drawing an income through a Choice Income account. 

Tax (including the benefit of franking credits, to the extent each option has exposure to Australian equities) is deducted from investment earnings, along with investment management fees, before the crediting rate is determined.

 

Tax on withdrawals

When you withdraw your super, your withdrawals are divided into a tax-free and a taxable-component, which is based on whether your contributions were made after-tax or before-tax.

Type of withdrawal Age  Tax rate
Lump-sum withdrawal
 
Under 60 

Tax-free component

  • No tax payable

Taxable component*

  • Under your preservation age: 22% tax
  • Between your preservation age and age 59: the first $215,000 is tax-free. The balance is taxed at 17%
Over 60 No tax payable
Income stream (regular payments from your super)
Under 60

Tax-free component

  • No tax payable

Taxable component*

  • Under your preservation age: marginal tax rate§
  • Between your preservation age and age 59: marginal tax rate less a 15% tax offset
Over 60 No tax payable
* If your taxable component includes an untaxed element, additional tax may be applied to that element.
† Includes Medicare levy.
‡ This amount is reduced by any amount previously applied to this threshold.
§ A tax offset of 15% may be available if you are receiving a disability super benefit.


Find out more

Read our Tax and super fact sheet for more information about how tax applies to your superannuation or visit ato.gov.au/super 

Read our Applying for a payment when a member dies fact sheet for more information about how tax applies to death benefit withdrawal payments after the death of a family member or loved one that is a member of AustralianSuper or visit ato.gov.au/super

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