Tax and super

June 28 2017

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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.

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 49%1 (including Medicare levy).

Type of contribution Tax rate
Concessional
(e.g. employer SG and salary sacrifice)
  • 15% on amounts up to $30,0002 (or $35,0002 if you are aged 49 or over on 30 June 2014) a year.
  • Where your combined income including concessional contributions exceeds $300,000 p.a., an additional 15% tax will apply to concessional contributions relating to the income exceeding $300,000.
Non-concessional
  • 0% on amounts up to $180,0002,3 a year
  • 49%1 on amounts above $180,0002,3 a year

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

2. Contribution caps are for the 2015/16 year and may change in the future.

3. If you're under age 65 at 1 July, you can bring forward two years and contribute up to $540,000 tax free for a three year period. Any contributions above the cap (or above $540,000 over three years if applicable) are taxed at 49%. You may be able to elect to release up to 85% of your excess concessional contributions from the fund. Excess concessional contributions over the above caps will be taxed at your marginal rate (plus an interest charge). You should monitor all contributions (made by you and on your behalf ) into your account to ensure they don't exceed the caps. Contributions tax is deducted from your account as at 30 June each year and on closure of your account (after insurance premiums and administration fees have been deducted from your account).

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 benefits after aged 60

If you’re aged 60 or over both your superannuation pension (or income stream) payments and lump sum superannuation payments are generally tax free.

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 - 2015/16). 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 59, the first $195,000* is tax free and the balance is taxed up to a maximum rate of 17%.
Taxable
(untaxed element)		 If under preservation age:
  • First $1.395 million taxed up to a maximum rate of 32%.
  • Amount above $1.395 million taxed at 49%.
  Between preservation age and 59:
  • First $195,000 taxed up to a maximum rate of 17%.
  • Amount between $195,001 and $1.395 million taxed up to a maximum rate of 32%.
  • Amount above $1.395 million taxed at 49%.

* The threshold of $195,000 is effective for 2015/16 and is indexed to Average Weekly Ordinary Time Earnings (AWOTE), but will only increase in $5,000 increments.

 


The taxation information contained above is based on our interpretations of law as at 1 July 2015. 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.