Tax and Other Useful Facts

Tax and other useful facts

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 $1.6 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 equivalent to 9.5% 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 www.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
2020/21 $57,090
2019/20 $55,270
   
Superannuation contribution caps  
Concessional 2020/21 $25,000
Concessional 2019/20 $25,000
Total superannuation balance on 30 June 2020 Non-concessional (2020/21)
Under $1.6 million $100,000
$1.6 million and over Nil
     
Eligible termination payment (ETP) threshold    
  2020/21 2019/20
ETP cap for excluded payments $215,000 $210,000
     
Bona fide redundancy payments (tax-free amounts)    
  2018/19 2019/20
Initial Amount $10,989 $10,638
Additional years $5,496 $5,320
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 ($215,000 for 2020/21).

Amount above $215,000 is subject to tax up to maximum rate of 15% plus medicare

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 Marginal tax rates (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 $1.565m.

Top marginal rates applies to amounts above $1.565m.

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 $215,000.

Amount exceeding $215,000 up to the untaxed plan cap amount ($1.565m) is taxed at a maximum rate of 30% plus medicare.

Amount exceeding $$1.565m is taxed at the top marginal rate.

Marginal tax rates and no tax offset.
Below preservation age Amount up to $1.565m is taxed at a maximum rate of 30% plus medicare. Amount exceeding $1.565m 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 1 July 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 $215,000 32.0%
  At or above preservation age Up to $215,000 17.0%
  All ages Up to $215,000 47.0%
Death benefit ETP paid to non-dependents
taxable component All ages Up to $215,000 32.0%
    Above $215,000 47.0%
Death benefit ETP paid to dependents
taxable component All ages Up to $215,000 Nil
    Above $215,000 47.0%
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 dependent 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 super benefit).
  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 AND MEDICARE LEVY

Taxable income Tax Marginal rate %
$18,200 Nil 19
$37,000 $3,572 32.5
$87,000 $20,797 37
$180,000 $54,097 45
Medicare high income earner rebates
Family structure Taxable income
Singles less than $90,000 $90,001-105,000 $105,001-140,000 $140,001 or more
Families* less than $180,000 $180,001-210,000 $210,001-280,000 $280,001 or more
Medicare Levy Surcharge 0% 1.00% 1.25% 1.50%

* Income thresholds are typically indexed on 1 July AWOTE. Indexation to commence from 1 July 2021

 

LOW INCOME TAX OFFSET (LITO)

Lower income threshold Higher income threshold Max offset
$0 $37,000 $445
$37,001 $66,667 $445-[(TI - $37,000) 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 $255
$37,001 $48,000 $255-[(TI - $37,000) x 0.075]
Over $48,001 $90,000 $1080
$90,001 $1 $1080-[(TI - $90,000) x 0.02]
Over $126,000   Nil
     

GOVERNMENT CO-CONTRIBUTIONS

Income year Lower income threshold Higher income threshold Max benefit
2020/21 $39,837 $54,837 $500
       

LOW INCOME SUPERANNUATION TAX OFFSET (LISTO)

Amount payable 2018/19 Maximum LISTO contribution Maximum adjusted taxable income* to be eligible Income test
15% x concessional contributions up to $3,333 $445 $37,000 10% or more of total income is derived from business or employment

*Adjusted taxable income = taxable income (disregarding any assessable FHSS released amount) + adjusted fringe benefits total + total foreign income + total net investment loss + tax free pension or benefit + reportable superannuation contributions + less deductible child maintenance expenditure.

 

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 Subject to work test No
Non-concessional contribution Yes Subject to work test No
Spouse contributions Yes Subject to work test No
Government co-contributions Yes Yes if under age 71 at the end of the financial year No

MINIMUM DRAWDOWNS APPLYING IN 2020-21

Age Standard drawdown 2020-21 annual percentage factor
Under 65 4% 2%
65-74 5% 2.5%
75-79 6% 3%
80-84 7% 3.5%
85-89 9% 4.5%
90-94 11% 5.5%
95 or older 14% 7%

SOCIAL SECURITY ENTITLEMENTS

Aged pension:
Family situation Maximum benefit ($ per fortnight)*#
Single pensioner $860.60
Partnered pensioner $648.70
Couple separated due to ill health (each) $860.60

*As at 1 July 2019 * Pension figures exclude the pension supplement (the maximum pension supplement amount is $68.50 per fortnight for singles and illness-separated couple members; $102.20 per fortnight combined for couples) and the energy supplement of $14.10 pf for singles and illness-separated couples or $10.60 pf for each member of a couple.

 The Superannuation Guarantee and AwardsDifferent Types of funds