How many times is your super taxed?
If you get the feeling that the taxman is double dipping into your superannuation savings, you are not wrong.
The forecast Budget figures for this year show that Treasury expects the Australian Taxation Office to collect about $7.7 billion in tax receipts from superannuation, an Australian Institute of Superannuation Trustees spokeswoman told YourLifeChoices.
“This figure is basically income tax collected from super funds and it probably doesn’t include the tax people need to pay if they take super out early,” she said.
The ATO applies its imposts on your retirement nest egg under various guises in what appears as a labyrinth of rules.
This is no one-size-fits-all scheme. The ATO considers your circumstances before deciding how to tax your super in one or more of several ways:
- before-tax super contributions
- after-tax super contributions
- excess contributions tax
- tax on high-income earners
- tax on withdrawing your super
- tax on death benefits.
The factors taken into account to evaluate your individual tax treatment include your age, the contribution’s source and how it is paid.
While it is difficult to put simply how the rules apply, essentially, a super contribution made before you pay income tax is taxed at 15 per cent. This payment into your fund is known as a concessional contribution. It can include both the amount an employer pays on your behalf and any salary-sacrificed amount.
A contribution made out of income that has already been taxed will generally not be taxed again as it goes into the fund (unless it exceeds a cap). This payment is known as a non-concessional contribution.
There are caps on how much before-tax and after-tax money you can pay into super each year. If you exceed these thresholds you can be liable for tax of up to 47 per cent for a portion of the contribution.
In this financial year, concessional contributions are limited to $25,000. Anything above that amount may be taxed at more than 15 per cent.
If your income exceeds $250,000, under the ATO’s Division 293 rule you will be levied even more tax.
When you withdraw funds from super, they are more often than not taxed at your marginal rate, depending on your age and whether the money is paid as a lump sum or through an income stream.
Then there is the levy on a fund’s death benefits that applies under certain circumstances.
To find out if your super money is being taxed correctly, contact your fund or a professional financial adviser. Otherwise, you can call the ATO on 13 10 20.
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