Tax and super

January 22 2020

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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.

 

 

Under the Superannuation Industry (Supervision) Act 1993 (Cth), relevant tax laws and the Privacy and Data Protection Act 2014 (Vic), ESSSuper is authorised to collect your tax file number ("TFN").

If you do provide your TFN to us, we will use it only for legal purposes. This includes finding or identifying your superannuation benefits where other information is insufficient and providing information to the Australian Taxation Office.

Provision of TFNs is voluntary and it is not an offence to not provide or quote your TFN when requested to do so. However, if you decide not to, you may be liable for extra tax on concessional contributions (e.g. on employer and salary sacrifice contributions paid into your account) and on benefit payments. We will also be unable to accept any personal contributions made by you or super co-contributions made for you. Please note that the consequences of not quoting your TFN may change in the future, as a result of legislative change.

You should note that we may disclose your TFN to the Commissioner of Taxation and, unless you request otherwise in writing, to another superannuation provider or retirement savings account provider to which benefits are being transferred. Your TFN will not otherwise be disclosed to any person or body.


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 click here.

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
  • If you have a total super balance of $1.6 million or more at 30 June of the previous financial year, any non-concessional contributions you make will be taxed at 47%1.

Please also refer to the Bring forward rule section below to see if you're eligible to contribute beyond the $100,000 cap.   

1. Rates shown include the Medicare levy of 2%.

2. Contribution caps are for the 2019/20 year and may change in the future.

3. Excess concessional contributions above this cap will be taxed at your marginal rate (plus an interest charge). You should monitor all concessional contributions made on your behalf in respect to all superannuation funds you may have to ensure they do not exceed the concessional contributions cap.

4. You should monitor all non-concessional contributions made by you or on your behalf in respect to all superannuation funds you may have to ensure they do not exceed the non-concessional contributions cap.  

5. Subject to indexation.  The concessional cap is indexed and will increase in increments of $2500 in line with Average Weekly Ordinary Times Earnings (AWOTE).  The non concessional cap will be indexed in line with the concessional contributions cap.  It will be 4 times that caps value (i.e $25,000 X 4 = $100,000). Accordingly, non-concessional contributions will increase in $10,000 increments.

 

Bring-forward rule for Non-concessional Contributions

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. 

 

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 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.


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 - 2019/20). 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 $210,000* is tax free and the balance is taxed up to a maximum rate of 17%.
Taxable
(untaxed element)		 If under preservation age:
  • First $1.515 million taxed up to a maximum rate of 32%.
  • Amount above $1.515 million taxed at 47%.
  Between preservation age and 60:
  • First $210,000 taxed up to a maximum rate of 17%.
  • Amount between $210,001 and $1.515 million taxed up to a maximum rate of 32%.
  • Amount above $1.515 million taxed at 47%.

* The threshold of $210,000 is effective for 2019/20 and is indexed to Average Weekly Ordinary Time Earnings (AWOTE), but will only increase in $5,000 increments.

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 2019 (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.

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. 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.

 


Learn more about tax when accessing super

FACT SHEET: Access to super + tax (PDF 61.3KB)

The taxation information contained above is based on our interpretations of law as at 1 July 2019. The level and basis of taxation may change and the application of taxation laws depends on your individual circumstances. You should therefore seek professional advice on the taxation implications of investing in ESSSuper's Income Streams and should not rely on the above information, which should be used as a guide only.