Tax and super
November 29 2023
Contains comprehensive information regarding the tax treatment of super.
Tax can be complicated and rates and thresholds are subject to change. It's important to know the impact of tax on your super.
Here you can find more information about providing your tax file number (TFN) to ESSSuper, tax considerations when you are building your super, and things to consider when you're ready to access your super.
Providing your tax file number (TFN)
ESSSuper is authorised by tax laws to request members' tax file numbers (TFNs). If you provide your TFN, ESSSuper will use it for lawful purposes only. It is not an offence not to provide your TFN and you are not obliged to by law.
Providing your TFN may have the following advantages:
- Your Accumulation Plan account will be able to accept all types of contributions.
- Tax on contributions to your Accumulation Plan account will not increase as a consequence of not providing your TFN.
- No additional tax will be deducted when you start receiving pension payments (other than what may ordinarily apply).
- It is easier to trace different superannuation accounts in your name so you receive all your superannuation benefits when you retire.
- We may also use your TFN to identify multiple accounts and consolidate them where permitted under law.
Supply/notify your TFN online
TAX WHEN BUILDING YOUR SUPER
Contribution caps and tax
The Federal Government sets limits (called contribution caps) on the amount of contributions made to all of your super accounts in a financial year. If you exceed these caps, extra tax applies.
Two separate caps apply for super contributions:
Concessional contributions: such as compulsory employer contributions (SG), salary sacrifice contributions and notional employer contributions (for defined benefits) or contributions for which a tax deduction has been claimed.
Non-concessional contributions: generally personal contributions made from after-tax income and other contributions not subject to tax.
For further information on contribution limits, read the ATO's Super contributions – too much can mean extra tax page.
The table below shows tax that applies to contributions if we have your tax file number (TFN). If we don't have your TFN, all contributions are taxed at 47% (including the Medicare levy of 2%).
|Type of contribution
(e.g. employer SG and salary sacrifice)
- 15% on amounts up to $27,5001,2,4 a year.
- Where your combined income including concessional contributions exceeds $250,000 p.a. (including the concessional contributions you make) an additional 15% tax will apply to concessional contributions relating to the income exceeding $250,000.
(e.g. personal or spouse contributions)
Please also refer to the Bring-forward rule for non-concessional contributions section below to see if you're eligible to contribute above the $110,000 cap.
Bring-forward rule for non-concessional contributions
If you're under 67 years of age, 'bring-forward' arrangements allow you to contribute three years' worth of non-concessional contributions in less than three years, provided you have completed any previous three-year arrangement. The bring-forward arrangements are:
- If you have a total super balance of $1.68 million or less, you can make non-concessional contributions of up to $330,000 by bringing forward the caps over a three-year period
- If you have a total super balance of more than $1.68 million but less than $1.79 million, you can contribute up to $220,000 by bringing forward the caps over a two-year period
- If you have a total super balance of more than $1.79 million but less than $1.9 million, you can contribute up to $110,000 (no bring-forward period, as the general non-concessional contributions cap applies)
- But if you have $1.9 million or more, you're no longer eligible to contribute non-concessional contributions or access the bring-forward rule.
For more information, please search "Contribution caps" on the ATO website at ato.gov.au
Tax above contribution caps
It's important to stay under the contributions caps because of the tax penalties that apply.
Any excess concessional contributions above the cap will be included in your assessable income and, if left in the fund, taxed at your marginal tax rate. They will also be counted towards your non-concessional contributions cap.
A notice of excess non-concessional (after-tax) contributions will be sent to you by the Australian Tax Office (ATO). The ATO's If you exceed your non-concessional contributions cap page describes the two options you have within 60 days from the date of that letter.
Note: If your excess contributions are in a defined benefit fund, option 2 is the only option available to you, and your tax will need to be paid from your own pocket. If the excess contributions are in an Accumulation Plan, you can choose between options 1 and 2 when you receive your determination letter.
If you have a total super balance above the transfer balance cap (refer below) at 30 June of the previous financial year, your non-concessional contributions cap is zero ($0.00). Refer to the ATO's website at ato.gov.au for more information.
Tax on investment earnings
Investment earnings in the accumulation phase and for Working Income Streams are generally taxed at 15%. The rate may be less due to tax credits or other rebates. Tax is deducted from investment earnings before net earning rates are declared and credited (or debited) to your account.
Note: This does not impact defined benefits you may have with ESSSuper. There is no tax on the investment earnings of Retirement Income Streams.
Claiming or varying a tax deduction for personal super contributions (Accumulation Plan)
If eligible, you can claim a tax deduction or vary a previous deduction for any personal non-concessional superannuation contributions you have made to your Accumulation Plan account for the current or previous financial year.
You can submit a Notice of intent (NOI) to claim or vary a tax deduction for personal contributions by logging into Members Online and navigating to the Contributions / Notice of Intent menu.
Am I eligible to claim a tax deduction?
You claim a tax deduction for your personal non-concessional superannuation contributions if you:
- Have not opened an Income Stream account using part or all of the contributions for which you intend to claim a tax deduction
- Are under age 67 (you do not need to work to be able to make personal non-concessional superannuation contributions)
- Are between age 67 and 75 and you satisfy a Work Test (which requires that you work at least 40 hours in not more than 30 consecutive days in the financial year that your contribution is made)
- Have provided your tax file number to ESSSuper
- Have (or are eligible to have) an Accumulation Plan
- Are planning to split all or part of your contributions with your spouse but you also want to claim a tax deduction for them, you must give us the notice of intent to claim a deduction first
- Have earned income as an employee or business operator during the year you want to claim the tax deduction.
If you have not yet set up an Accumulation Plan, read the Accumulation Plan Product Disclosure Statement (PDS) available on the PDS and handbooks page or by contacting us. You can open a new account by logging into Members Online and navigating to the Account / Open Accumulation Plan menu.
Limits on what you can claim
You cannot claim a tax deduction for:
- Super you transfer from one fund to another
- Contributions you split with your spouse
- Super contributions you transfer to commence an Income Stream account
- Contributions that were made more than 28 days after the month you turned age 75.
Can I change the amount I wish to claim as a tax deduction?
Yes. If you’ve already submitted an NOI in the previous financial year but you want to claim a tax deduction for an different (i.e. additional or lesser) amount to that NOI, log into Members Online and enter the revised amount you want to claim to vary your NOI. If you do not want to claim any of your personal contributions, you will need to reduce your claim amount to zero.
When can I reduce the amount I wish to claim as a tax deduction?
You can apply to reduce your claim amount if:
- You have not yet lodged your income tax return and it is on or before 30 June in the financial year following the year you made the contribution, or
- The ATO have disallowed your claim for a deduction and you are applying to reduce the amount claimed as a deduction by the amount that the ATO disallowed.
Making a partial claim
If you transfer some of your super to another fund or take part of it in cash, you could still be able to claim a partial tax deduction for the personal contributions that are left in the Accumulation Plan account.
For further information, please contact the ATO or your tax adviser.
Tax on your personal contributions
When you advise ESSSuper of your intention to claim a tax deduction for your personal contributions, ESSSuper is required to deduct 15% tax from those contributions.
Claiming your contributions as a tax deduction may reduce the amount of tax you need to pay on your income. This will depend on your personal tax rate.
If you claim a deduction on all of your personal contributions, you will not be eligible for the Commonwealth Government's co-contributions. If you only claim on part of the personal contributions you may still be eligible.
For further information, please contact the ATO or your tax adviser.
When to claim
When you make a contribution, you have until the earlier of the following to claim your tax deduction:
- The date you submit your tax return, or
- The end of the following financial year in which the personal contributions were made.
- 31 March 2021: Lucy contributes $4,000 to her super
- 1 July 2021: New financial year
- 31 October 2021: Lucy lodges her NOI tax deduction claim with ESSSuper
- 30 June 2022: Lucy lodges her income tax return
Lucy must submit her claim for a tax deduction before the earlier of lodging her income tax return and 30 June of the following financial year in which the personal contributions were made.
TAX WHEN ACCESSING YOUR SUPER
Tax on rollovers
If you rollover your benefit to another complying fund, you do not pay lump sum tax at the time of the rollover (unless your benefit includes an untaxed taxable amount). You may pay tax when you receive your benefit as cash.
Tax on lump sum benefits withdrawn from super before age 60
If you are aged 60 or over any lump sum superannuation payments are generally tax free.
If you are aged 60 or over pensions received from a 'taxed' superannuation fund (ESSSuper) are tax free up to a $118,750 Defined Benefit Pension cap (indexed). 50% of Defined Benefit Pension income above the cap of $118,750 per year (indexed) will be included as assessable income and taxed at your marginal tax rate.
Tax on benefits before age 60
If you're under age 60, tax may be withheld from your payment if your benefit contains a taxable component (see table below for the 2023-24 financial year). The rates below assume you have provided your TFN. All rates include the Medicare levy of 2%.
|If under preservation age, taxed up to a maximum rate of 22%.
Between preservation age and 60, the first $235,000* is tax free and the balance is taxed up to a maximum rate of 17%.
If under preservation age:
Between preservation age and 60:
- First $1.705 million taxed up to a maximum rate of 32%
- Amount above $1.705 million taxed at 47%.
- First $235,000 taxed up to a maximum rate of 17%
- Amount between $235,001 and $1.705 million taxed up to a maximum rate of 32%
- Amount above $1.705 million taxed at 47%.
Transfer balance cap
The transfer balance cap is a lifetime limit on the total amount of super you can transfer into retirement phase income streams, pensions, and/or annuities.
Your personal cap amount will depend on how much super you have transferred from your accumulation phase super account and/or transition to retirement income stream into a retirement phase income stream at 30 June of the previous financial year.
From 1 July 2017 until 30 June 2021, if you had a transfer balance account your personal transfer balance cap was equal to the general transfer balance cap of $1.6 million. This was indexed to $1.7 million on 1 July 2021, which means that there is not a single cap that applies to all individuals. The general transfer balance cap was indexed again on 1 July 2023, to $1.9 million.
You have your own personal transfer balance cap, depending on the:
- Financial year you first start your transfer balance account
- Any increments that have been applied.
The transfer balance cap doesn't apply to Working Income Stream accounts (i.e. 'transition to retirement' income streams).
If you exceed your personal transfer balance cap you will have an excess transfer balance, which is the sum of the amount that exceeds your personal transfer balance cap and the earnings on that excess amount. You will need to:
- Withdraw the excess transfer balance or (if eligible) transfer it back to your super account, and/or
- Pay excess transfer balance tax.
The Australian Taxation Office (ATO) is responsible for the administration of the transfer balance cap. Members wanting information about their transfer balance cap should view this at ATO online services (available through your myGov account at my.gov.au/login). ESSSuper does not have access to your transfer balance cap information. Further information is available by searching 'transfer balance cap' on the ATO website at ato.gov.au