How is super taxed?

How much tax do you pay on super?

Navigating the world of superannuation tax can be a bit of a headache. Depending on your age, total super amount, and the type of contribution or withdrawal you make, you could be looking at different tax rates.

To help make sense of it all, we've put together a handy table summarising the tax rates for some of the most common contribution types when dealing with super. But keep in mind that this doesn’t cover every scenario and everyone's situation is unique, so it's a good idea to seek advice from the experts from a tax accountant or financial adviser.

	Type of contribution	Tax rate	Notes
Concessional (or before-tax) contributions	Super guarantee contributions	15%	Low-income earners may be eligible for low-income super tax offset (LISTO)
	Salary sacrifice	15%
	Personal contributions you claim as a tax deduction	15%
	Division 293	Additional 15% on your taxable contributions	Division 293 is for individuals whose combined income and contributions are greater than the Division 293 threshold of $250,000 p/a.
Non-concessional (or after-tax) contributions	Personal contributions (not claimed as a tax deduction)	Tax free
	Spouse contributions	Tax free
	Government co-contribution and LISTO payment	Tax free
	Downsizer contribution	Tax free	$300,000 downsizer contribution cap applies
Other	Investment earnings	- 15% for accounts in accumulation phase and transition to retirement. - Tax-free if you’re retired (subject to transfer balance cap).	Capital gains tax (CGT) discount may apply
Other	Excess transfer balance tax	- 15% for the first time you exceed the cap. - 30% for subsequent times	Capital gains tax (CGT) discount may apply

Do you pay tax on super contributions?

Yes, you may have to pay tax on some super contributions, depending on the type of contribution and your circumstances.

Concessional contributions (before-tax)

Concessional contributions are super contributions made before tax, which includes super guarantee contributions and salary sacrifice payments. These contributions are generally taxed at a concessional rate of 15% when paid into your super account.

However, if your combined income and contributions are over the Division 293 threshold of $250,000 per financial year, you may be subject to an additional 15% tax on some or all of your concessional contributions, known as Division 293 tax. Check out the ATO website for more information on Division 293 tax and how it is calculated.

Non-concessional contributions (after-tax)

Non-concessional contributions are made with after-tax income, such as personal contributions not claimed as a tax deduction and spouse contributions. Since tax has already been paid on them, these contributions aren’t taxed again when they’re paid into your super account. Keep in mind there are limits to how much you can contribute each year — if you exceed these limits, you may have to pay extra tax on your contributions.

Exceeding contributions

If you exceed the concessional or non-concessional caps, you may be subject to extra tax. For more information, you can read our Facts and Figures page on excess contributions or visit the ATO to understand how extra contributions can mean extra tax.

How are investment earnings in superannuation taxed?

Investment earnings from your super can help grow your retirement savings, but did you know that they can be taxed differently depending on your situation?

Accumulation phase

If you're in the accumulation phase, you're probably working hard to grow your super balance as much as possible. The good news is that investment earnings in this phase are generally taxed at a concessional rate of 15%.

Retirement phase

If you’re in the retirement phase, your investment earnings are generally not taxed, provided that your super balance falls within the transfer balance cap.

Transition to Retirement income streams are not considered to be in ‘retirement phase’ and as such a tax rate of 15% will apply until it is in the retirement phase (e,g, when you reach your preservation age and declare retirement or turn age 65).

Do you pay tax on super withdrawals when you retire?

After working hard and saving for years, the last thing you want is a nasty tax surprise when you retire. How much tax you pay on your super withdrawals when you retire depends on:

your age
your total super balance
whether you choose to withdraw your super as a lump sum or income stream
how much of your super is in a tax-free component or a taxable component.

Generally, if you take any part of your super benefit after age 60, no tax is payable. Keep these in mind as you make your retirement plans. It might also be worth consulting with a financial adviser to figure out the right withdrawal strategy for you.

Tax on lump sum withdrawals

Age at date of payment	Tax free component	Taxable component
Age 60 and over	Tax-free	Tax-free
From preservation age to 60	Tax-free	- Tax free - up to the low-rate cap amount - Taxed at 15% plus Medicare Levy - over the low-rate cap amount
Under preservation age	Tax-free	Taxed at 20% plus Medicare Levy*

Age at date of payment	Age 60 and over
Tax free component	Tax-free
Taxable component	Tax-free
Age at date of payment	From preservation age to 60
Tax free component	Tax-free
Taxable component	- Tax free - up to the low-rate cap amount - Taxed at 15% plus Medicare Levy - over the low-rate cap amount
Age at date of payment	Under preservation age
Tax free component	Tax-free
Taxable component	Taxed at 20% plus Medicare Levy*

Age at date of payment	Tax free component	Taxable component
Age 60 and over (NB for 2023-24, if you have a defined benefit income stream with income payments above $118,750 p.a. the taxable component will be taxed)	Tax-free	Tax-free
From preservation age to 60	Tax-free	Taxed at your marginal tax rate less 15% tax offset
Under preservation age and totally and permanently disabled	Tax-free	Taxed at your marginal tax rate (if the pension payment is a disability income stream, you may be entitled to a 15% tax offset)

Age at date of payment	Age 60 and over (NB for 2023-24, if you have a defined benefit income stream with income payments above $118,750 p.a. the taxable component will be taxed)
Tax free component	Tax-free
Taxable component	Tax-free
Age at date of payment	From preservation age to 60
Tax free component	Tax-free
Taxable component	Taxed at your marginal tax rate less 15% tax offset
Age at date of payment	Under preservation age and totally and permanently disabled
Tax free component	Tax-free
Taxable component	Taxed at your marginal tax rate (if the pension payment is a disability income stream, you may be entitled to a 15% tax offset)

Date of birth	Preservation age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
From 1 July 1964	60

What is the difference between tax-free and taxable super?

When you withdraw from your super, it’s important to understand the tax status of the money. It typically depends on the contribution type and whether tax was paid on it.

Keep in mind that the super benefit you withdraw must keep the same proportion of the tax-free and taxable components of your super balance. Known as the proportioning rule, this means you can’t choose to only withdraw the tax-free component.

Tax-free component

As the name suggests, you don’t pay tax on the tax-free component of your super, whether you withdraw it as a lump sum or as an income stream.

The tax-free component of your super can come from:

non-concessional (after-tax) contributions, such as personal contributions which you haven’t claimed a tax deduction for spouse contributions
government co-contributions
government payments from the low-income super tax offset (LISTO)

Taxable component

Simply put, the taxable component of your super is what's left after subtracting the tax-free component from the total value of your super. It can come from:

employer contributions
contributions from salary sacrifice arrangements
personal contributions that you’ve claimed as tax deductions
investment earnings

The taxable component may have two parts:

Taxed element — the portion of the taxable super where your super fund has already paid 15% tax on the contributions or earnings.
Untaxed element — As Rest is a taxed super fund, Rest member super balances don’t include untaxed elements. Visit the ATO website for more information.

Do you pay tax on death benefits?

When someone dies, their super plus the proceeds of any insured benefits is typically paid to their beneficiaries. This payment is called a superannuation death benefit.

The amount of tax payable on the death benefits depends on:

whether the beneficiary is a dependant or non-dependant for tax purposes
whether the benefit is paid as a lump sum or income stream
the tax-free and taxable component mix of the deceased’s super
In some cases the age of both the deceased and the beneficiary (e.g. if the death benefit will be taken as an income stream)

For details about how death benefits are taxed, visit the ATO website.