Taxes paid in regard to superannuation funds are assessed at three stages contribution, investment earnings, and withdrawals.
Your total tax obligation from super contributions mostly depends on the type of contribution, but can also be affected by your income level. Concessional contributions, also known as employer and salary-sacrificed super contributions, are taxed at 15% when they go into your super fund.
High-income earners with a combined salary and super contributions greater than $250,000 will pay an additional duty known as the Division 293 tax. This is either an additional 15% tax on concessional contributions, or the total amount by which you exceed the 293 income threshold – whichever is lesser.
Low-income earners – those who make $37,000 or less – will have any tax paid on super contributions (up to $500) automatically added back into their super accounts through LISTO (the low income super tax offset).
Contributions received under the government’s co-contribution scheme and any after-tax personal contributions incur no tax when they are put into the super fund.
Investment earnings (income which is earned in the fund) are taxed at a maximum rate of 15%. Capital gains on assets held longer than 12 months within the fund will also be taxed (at 10%). However, your tax obligation on certain assets of this variety, like growth funds, can be reduced by a combination of deductions or credits and ultimately fall to approximately 7%.
When you become eligible to access your super, you can choose a super income stream or withdraw all or part of your benefit as a lump sum. If you are over age 60, streams and lump sums are typically tax-free – but those under 60 may have tax payable up to a top rate of 22%.
Typically, if you transfer money from one super fund to another – whether you are consolidating or switching – no additional tax is payable. However, if you are moving from an untaxed fund, such as an older-style, government employee designated account, there might be taxes owed.
Would you like to know more about superannuation funds and TPDs? Talk to a member of our team at Gerard Malouf & Partners Compensation, Medical Negligence & Will Dispute Lawyers.