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AU Tax 2024

How Superannuation affects your Taxable Income

This supperannuation guide looks at how your superannuation affects your taxable income and the thresholds, rates and tax calculations applied against superannuation. The tax you pay on your super contributions and your super benefits depend on a range of factors.

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The tax on your super contributions generally depends on the type of contribution and how much you contribute each year.

The tax on your super benefits depends on things such as your age, the source of your benefit and how your benefit is paid.

The tax treatment of both super and death benefits is also affected by whether the benefits are paid as a lump sum or income stream (regular payments).

Tax on contributions

The tax you pay on your super contributions generally depends on whether the contributions were made before or after you paid income tax, you exceed the super contribution caps or you are a high-income earner.

Before-tax super contributions (Concessional)

The super contributions you make before tax (concessional) are taxed at 15%.

Types of before-tax contributions include:

  • Employer contributions, such as compulsory employer contributions and salary sacrifice payments made to your super fund
  • Contributions that you are allowed as an income tax deduction
  • Notional taxed contributions if you are a member of a defined benefit fund.
  • Unfunded defined benefit contributions
  • Constitutionally protected funds

After-tax super contributions (Non-concessional)

The super contributions you make after tax (non-concessional) are not subject to tax.

Types of after-tax contributions include:

  • Contributions you or your employer make from your after-tax income
  • Contributions your spouse makes to your super fund
  • Personal contributions that are not claimed as an income tax deduction

Excess contributions tax

There are limits on the amount of before-tax and after-tax contributions you can make each year, and these may vary depending on the financial year and your age.

If you contribute too much to your super, you may have to pay extra tax.

If you exceed the before-tax (concessional) super contributions cap, the excess is included in your income tax return and taxed at your marginal tax rate. You can choose to withdraw some of the excess contributions to pay the additional tax.

If you exceed the after-tax (non-concessional) super contributions cap, you can choose to withdraw the excess contributions and any earnings. The earnings are then included in your income tax assessment and taxed at your marginal rate.

If you don’t withdraw the earnings, the excess is taxed at 47%.

Division 293 tax for high-income earners

Division 293 tax is an additional tax on super contributions if your combined income and super contributions are more than the threshold. From 1 July 2017 this threshold is being reduced to $250,000.

Division 293 tax is 15% of your taxable concessional contributions above the $250,000 threshold.

If you are a member of a defined benefit fund, Division 293 tax may be calculated on notional contributions, which are not capped.

Salary sacrificing super

Salary sacrifice is an arrangement with your employer to forego part of your salary or wages in return for your employer providing benefits of a similar value.

One example of a salary sacrifice arrangement is to have some of your salary or wages paid into your super fund instead of to you.

If you make super contributions through a salary sacrifice agreement, these contributions are taxed in the super fund at a maximum rate of 15%. Generally, this tax rate is less than your marginal tax rate.

The sacrificed component of your total salary package is not counted as assessable income for tax purposes. This means that it is not subject to pay as you go (PAYG) withholding tax.

If salary sacrificed super contributions are made to a complying super fund, the sacrificed amount is not considered a fringe benefit.

Salary sacrifice limitations

If there are no limitations specified in the terms of your employment, there is no limit to the amount you can salary sacrifice.

However, you should also consider whether:

  • The additional salary you wish to sacrifice will cause you to exceed the concessional (before-tax) contributions cap and attract additional tax – this cap limits the amounts that can be contributed to your super fund and still receive the concessional tax rate of 15%
  • The salary amount you sacrifice will attract Division 293 tax – this occurs when you have an income and concessional super contributions of more than $300,000 in one year.