How your super is taxed

how superannuation is taxed

These pages contain general information about tax rates and thresholds for super contributions and benefits.

The main thing to understand about how super is taxed is that it used to be taxed at three points - on the way in as contributions, inside the fund as earnings and on the way out as benefits. However, for most people past the age of 60, super is now effectively tax-free.

If you have more than $1.7 million in superannuation the portion above this threshold will be taxed but only at 15%. But regardless of how and at what stage superannuation is taxed, it is still taxed at extremely concessional levels compared to other types of investment and this is what makes superannuation so special.

Limits, thresholds and special conditions nonetheless still exist around superannuation tax and it is important that employers, their employees, consumers and financial advisers properly understand these rules or consult with someone who does.

For example, while an individual or company (on behalf of its employees) may contribute any amount into superannuation, there is a limit to which those contributions attract a tax deduction. Moreover, the government requires all employers to provide a minimum level of superannuation for their employees, called the super guarantee, which is currently equivalent to 10.5% of an employee's wage or salary.

Some employers may, of course, contribute more and the government has even established a bonus scheme for low-income earners.

To find out more about how the government has changed the superannuation taxation rules to make it even more attractive than it was, see ato.gov.au/super. To help you get started, we have prepared the following taxation information tables.

THRESHOLD SUMMARY

Financial year Charge percentage
2014/15 to 2020/21 9.5%
2021/22 10%
2022/23 10.5%
2023/24 11%
2024/25 11.5%
2025/26 and later years 12%
   
Maximum contribution base Amount in a quarterly contribution period
2021/22 $58,920
2022/23 $60,220
   
Superannuation contribution caps  
Concessional 2021/22 $27,500
Concessional 2022/23 $27,500
Total superannuation balance on June 30, 2022 Non-concessional (2022/23)
Under $1.7 million $110,000
$1.7 million and over Nil
     
Eligible termination payment (ETP) threshold    
  2021/22 2022/23
ETP cap for excluded payments $225,000 $230,000
     
Bona fide redundancy payments (tax-free amounts)    
  2021/22 2022/23
Initial Amount $11,341 $11,591
Additional years $5,672 $5,797
Company tax rate* 30% 30%
Source: The Australian Taxation Office
* The full company tax rate of 30% applies to all companies that are not eligible for the lower company tax rate.
     

SUPER LUMP SUM TAX

Taxed in the fund:
Age Lump Sum Income Stream
Age 60 and over Tax-free Tax-free
Preservation age to age 59 0% up to the low rate cap ($230,000 for 2022/23).

Amount above $230,000 is subject to tax up to maximum rate of 15% plus Medicare levy

Marginal tax rates and tax offset of 15% of the taxable component.
Below preservation age Subject to tax up to maximum rate of 20% plus Medicare levy Marginal tax rates, with no tax offset.
Source: The Australian Taxation Office
 
Untaxed in the fund:
Age Lump Sum Income Stream
Age 60 and over Subject to tax up to a maximum of 15% on amount up to the untaxed plan cap amount of $1.65 million.

Top marginal rates applies to amounts above $1.65 million.

Marginal tax rates and tax offset of 10% of element untaxed in the fund.
Preservation age to age 59 Subject to tax up to a maximum of 15% plus Medicare on amount up to the low-rate cap amount of $230,000.

Amount exceeding $230,000 up to the untaxed plan cap amount ($1.65 million) is taxed at a maximum rate of 30% plus Medicare.

Amount exceeding $1.65 million is taxed at the top marginal rate.

Marginal tax rates, with no tax offset.
Below preservation age Amount up to $1.65 million is taxed at a maximum rate of 30% plus Medicare.

Amount exceeding $1.65 million amount is taxed at the top marginal rate.

Taxed at marginal rates, with no tax offset.
     
Death benefit payments to non-dependants:
Age of deceased Type of death benefit Age of Recipient Taxation treatment
Any age Lump sum Any age Element taxed in the fund is taxed at 15%. Element untaxed in the fund is taxed at 30%
Any age Income stream Any age Cannot be paid as an income stream. Income streams that commenced before July 1, 2007, are taxed as if received by a dependant.
     
Death benefit payments to dependants:
Age of deceased Type of death benefit Age of Recipient Taxation treatment
Any age Lump sum Any age Tax-free (not assessable, not exempt income).
Aged 60 and over Income stream Any age Element taxed in the fund is tax-free. Element untaxed in the fund is taxed at marginal rates
with offset of 10% of the element untaxed in the fund.
Below age 60 Income stream Above age 60 Element taxed in the fund is tax-free. Element untaxed in the fund is taxed at marginal rates
with offset of 10% of the element untaxed in the fund.
Below age 60 Income stream Below age 60 Element taxed in the fund is taxed at marginal rates with offset equal to 15% of the amount. Element untaxed in the fund is taxed at marginal rates.
       
  Age Component subject to PAYG withholding Tax treatment
Superannuation lump sum benefit less than $200 Any None Nil
Superannuation lump sum benefit (terminally ill recipient) Any None Nil

Source: The Australian Taxation Office

ELIGIBLE TERMINATION PAYMENTS (ETP) TAX

Component Age when paid Amount subject to tax Max tax rate*
Line benefit ETP
Taxable component Under preservation age Up to $230,000 32%
  At or above preservation age Up to $230,000 17%
  All ages Up to $230,000 47%
Death benefit ETP paid to non-dependents
taxable component All ages Up to $230,000 32%
    Above $230,000 47%
Death benefit ETP paid to dependents
taxable component All ages Up to $230,000 Nil
    Above $230,000 47%
Death benefit ETP paid to dependents
taxable component Taxed in the hands of the beneficiary of the estate, as above, based on whether the beneficiary is a dependant or not.
* Includes Medicare levy
Source: The Australian Taxation Office
   

SUPER INCOME STREAM TAX

Age of recipient Element taxed in the fund of a super income stream
Age 60 or above Tax free
Under 60 but at or above preservation age Taxed at marginal tax rates, 15% tax offset.
Under preservation age Taxed at marginal tax rates with no tax offset (15% tax offset available if disability superannuation benefit).
Age of recipient Element untaxed in the fund of a super income stream
Element untaxed in the fund of a super income stream Taxed at marginal rates, with a 10% tax offset.
Under 60 but at or above preservation age Taxed at marginal rates, with no tax offset.
Under preservation age Taxed at marginal rates, with no tax offset.
 

PERSONAL MARGINAL INCOME TAX RATE

Taxable income Tax
0 - $18,200 Nil
$18,201 - $45,000 $0 + 19% > $18,200
$45,001 - $120,000 $5,092 + 32.5% > $45,000
$120,001 - $180,000 $29,467 + 37% > $120,000
Over $180,000 $51,667 + 45% > $180,000
*The above rates do not include the Medical levy of 2%
   
Medicare levy surcharge
Family structure Taxable income
Singles Less than $90,000 $90,001 - $105,000 $105,001 - $140,000 $140,001 or more
Families (combined) Less than $180,000 $180,001 - $210,000 $210,001 - $280,000 $280,001 or more
Medicare Levy 0% 1.00% 1.25% 1.50%
* Income thresholds are typically indexed on 1 July with Average weekly ordinary time earnings (AWOTE).
         

LOW INCOME TAX OFFSET (LITO)

Lower income threshold Higher income threshold Max offset
$0 $37,500 $700
$37,501 $45,000 $700 - [(TI - $37,000) x 0.05]
$45,001 $66,666 $325 - [(TI - $45,000) x 0.015]
Over $66,667   Nil
     

LOW AND MIDDLE INCOME TAX OFFSET (LMITO)

Lower income threshold Higher income threshold Max offset
$0 $37,000 $675
$37,001 $48,000 $675 - [(TI - $37,000) x 0.075]
Over $48,001 $90,000 $1,500
$90,001 $126,000 $1,500 - [(TI - $90,000) x 0.03]
Over $126,000   Nil
     

GOVERNMENT CO-CONTRIBUTIONS

Income year Lower income Higher income Max benefit
2022/23 $42,016 $57,016 $500
       

LOW INCOME SUPERANNUATION TAX OFFSET (LISTO)

Amount payable 2020/21 Maximum LISTO contribution Maximum adjusted taxable income* to be eligible Income test
15% of concessional contributions up to $3,333 $500 $37,000 10% or more of total income is derived from business or employment
* Adjusted taxable income = taxable income + adjusted fringe benefits total + total foreign income + total net investment loss + tax free pension or benefit + reportable superannuation contributions.
       

AGE RESTRICTIONS ON CONTRIBUTIONS

Type of contribution Under 67 Over 67 but under 75* 75 and over
Super guarantee contributions Yes Yes Yes
Voluntary employer contributions Yes Yes No
Personal concessional contributions Yes Subject to work test No
Non-concessional contributions Yes Yes No
Spouse contributions Yes SYes No
Government co-contributions Yes Yes, if under age 71 at the end of financial year** No
* Includes on or before 28 days after the end of the month in which the member turns 75 years old.
** To be eligible for the government co-contribution, you will need to be aged under 71 at the end of financial year.
 

MINIMUM DRAWDOWNS APPLYING IN 2022-23

Age Standard drawdown 2020-21 annual percentage factor
Under 65 2% 2%
65-74 2.5% 2.5%
75-79 3% 3%
80-84 3.5% 3.5%
85-89 4.5% 4.5%
90-94 5.5% 5.5%
95 or older 7% 7%

SOCIAL SECURITY ENTITLEMENTS

Aged pension:
Family situation Maximum benefit ($ per fortnight)*
Single pensioner $1,026.50
Partnered pensioner $773.80
Couple separated due to ill health (each) $1,026.50
As of September 20, 2022
* Pension figures include the pension supplement and the energy supplement.
Source: Services Australia

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