Tax and super
October 23 2018
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ATO Website
Contains comprehensive information regarding the tax treatment of super.
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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 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.
Use this form to provide us with your TFN.
Tax file number notification (PDF 139.8KB)
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.
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%1 (including Medicare levy).
| Type of contribution |
Tax rate |
Concessional
(e.g. employer SG and salary sacrifice) |
- 15% on amounts up to $25,0002,3,5 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.
|
| Non-concessional |
- 0% on amounts up to $100,0002,4,5 a year
- 47%1 on amounts above $100,0002,4,5 a year on all non-concessional contributions where there is a total super balance in excess of $1.6 million (indexed) at 30 June of the previous financial year.
Please also refer to the Bring forward rule section below to see if you're eligible to contribute beyond the $100,000 cap.
|
If you have a total super balance of less than $1.4 million and you are under 65 years, you can ‘bring forward’ more than $100,000 of non-concessional contributions in one year (e.g. you can exceed the non-concessional cap), as long as you don’t exceed $300,000 over a rolling three-year period. If you have a total super balance of $1.4 - $1.5 million and you are under 65 years, you can bring forward up to $200,000 over a two-year period. Transitional rules apply if you have already triggered the current $540,000 (pre 1 July 2017) bring-forward non-concessional contribution rules since 1 July 2014. If you have triggered the bring forward rule in any of the 3 financial years since 1 July 2014, please consult a qualified financial adviser for advice on this topic.
Tax above contribution caps
The ATO provide a great short video explaining what happens if you go over the super contribution caps.
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 (plus an interest charge).
Any excess concessional contributions above the cap 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) and must be used to authorise release of these excess contributions from your super account. It is important to stay under this cap because of the tax penalty that applies.
Tax on investment earnings
Investment earnings in the accumulation phase 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 eligible income streams.
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 aged 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 $100,000 Defined Benefit Pension cap (indexed). 50% of Defined Benefit Pension income above the cap of $100,000 per annum (indexed) will be included as assessable income and taxed at your marginal tax rate.
Tax on benefits before aged 60
If you’re under 60, tax may be withheld from your payment if your benefit contains a taxable component (see table below - 2017/18). The rates below assume you have provided your TFN. All rates include the Medicare levy of 2%.
| Benefit component |
Tax withheld |
| Tax free |
Nil |
Taxable
(taxed element) |
If under preservation age, taxed up to a maximum rate of 22%. Between preservation age and 60, the first $200,000* is tax free and the balance is taxed up to a maximum rate of 17%. |
Taxable
(untaxed element) |
If under preservation age:
- First $1.445 million taxed up to a maximum rate of 32%.
- Amount above $1.445 million taxed at 47%.
Between preservation age and 60:
- First $200,000 taxed up to a maximum rate of 17%.
- Amount between $200,001 and $1.445 million taxed up to a maximum rate of 32%.
- Amount above $1.445 million taxed at 47%.
|
Transfer Balance Cap
The total amount you can retain or transfer into a Retirement Income Stream Account where earnings are exempt from taxation has been capped (Transfer Balance Cap is $1.6 million as at 1 July 2017 (subject to indexation)). If you have more than the Transfer Balance Cap, the ATO will send you an assessment notice that instructs you to either:
- Withdraw the amount in excess of the $1.6 million cap;
- or Transfer the excess to an accumulation phase account.
From 1 July 2017, the ATO will calculate notional earnings on any amount in excess of the Transfer Balance Cap () in a retirement income stream in the retirement phase. The notional earnings on the excess amount will be liable for the excess transfer balance tax of 15% until the excess amount is removed. From 1 July 2018, the Excess Transfer Balance tax rate is 15% for the first time that you breach the cap and then 30% for subsequent breaches of the cap.