Taxes apply to your super contributions, investment earnings and withdrawals. Understanding how these taxes are applied, can help ensure 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 before tax, you’ll pay super contributions tax on those contributions. The amount of tax on superannuation you’ll pay, depends on:
- whether you’ve supplied your Tax File Number or not (securely supply your TFN)
- your total annual income
- whether you’ve stayed within the contribution caps.
- Before-tax contributions
- After-tax contributions
Before-tax contributions are also known as concessional super contributions. They're super contributions you or your employer make from your before-tax income.
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 and claim a tax deduction for
You can contribute a total of up to $27,500 (concessional contributions cap) before tax each financial year from 1 July 2021.
Before-tax contributions are generally taxed at 15%, unless you:
- earn more than $250,000 p.a1.
- haven’t given your TFN to your super fund
- go over the concessional contributions cap.
In the above situations, extra taxes may apply.
If you go over your concessional contributions cap
The excess contributions will get taxed at your marginal tax rate, plus Medicare levy. You can withdraw up to 85% of your excess contributions. Any excess before-tax contributions not released count towards your after-tax contributions cap.Carrying over unused concessional cap amounts
If eligible, you may be able to carry over unused concessional contributions cap amounts from previous financial years. Here’s how it might work:
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James is 35, earns $120,000 p.a. and has $112,000 in super.
In 2022/23 his total concessional super contribution was $22,000. That’s $11,400 in employer contributions and $10,600 in before-tax personal contributions. As the 2022/23 concessional contributions cap was $27,500, James has $5,500 remaining that he can use in 2023/24.
If James adds his $5,500 from 2022/23 to the 2023/24 cap of $27,500, he can contribute $33,000 in 2023/24.
James can carry over unused concessional contributions like this for 5 financial years2.
To be eligible to carry over unused concessional contributions cap amounts your total super balance must be less than $500,000 on 30 June of the previous financial year.
Find out more about before-tax salary sacrifice contributions
To find out more about before-tax contributions.
read our Growing your super through salary sacrifice fact sheet
What if my employer doesn’t allow salary sacrifice?
If you can't salary sacrifice, you can contribute after-tax and claim a tax deduction. After-tax contributions you claim a tax deduction for are treated like before-tax contributions. The concessional contributions cap applies.
Read our Claiming a tax deduction for personal contributions fact sheet
Tax on investments
Your super investment earnings are generally taxed at 15% while you're working.
Taxes get deducted from investment earnings with any applicable fees3. They're deducted before determining the final net investment earnings credited to your account.
Your investments aren't taxed if you're retired and in a Choice Income account.
Tax on withdrawals
Super withdrawals get divided into tax-free and taxable components. This depends on whether your contributions made were after-tax or before-tax contributions.
The amount of tax applied to your withdrawal, differs depending on:
- your age
- whether the component you’re withdrawing is taxable or tax-free, and
- if you take your payment as a lump sum or income stream.
read our Tax and super fact sheet
Tax on death benefit payments
Taxes may also apply when you make a death benefit withdrawal.
Read our Applying for a payment when a member dies fact sheet
1 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 extra 15% tax is sometimes referred to as division 293 tax or div 293 tax. Find out more at ato.gov.au/rates/key-superannuation-rates-and-thresholds
2 Starting from 1 July 2019, your concessional contribution cap may be increased by any unused concessional contribution cap amounts carried forward from the last 5 years, provided you satisfy all of the requirements. Please visit ato.gov.au for more information.
3 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.