How many times is your super taxed?

The taxman has many ways of extracting a share of your super.

superannuation tax

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:

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.



    To make a comment, please register or login

    12th Sep 2017
    Like, who gives a continental. Taxes are a part of everyday life in Australia, both direct and indirect. This article just muddies the water with a strong suggestion that all of the taxes and imposts mentioned apply to all superannuation accounts. When I was in the workforce, all I needed to know was if my super contributions had been paid into my superannuation fund and that the amount was increasing year on year. I note that no mention has been made about a union controlled super fund donating members' money to various unions.
    12th Sep 2017
    I care OM. WE do need to try and fathom what is going on to make the right decisions whenever possible.
    However I think the best tax breaks are by keeping your money in super rather than the bank. I think that's why we are forced to draw down a certain percentage each year once we begin using the fund money.
    The government wants access to our money!
    13th Sep 2017
    They don't mention financial industry funds donating money to shareholders and various staff bonus arrangements either do they?

    Why is it okay when the wealthy business class do it but very bad when workers do?
    12th Sep 2017
    taxes explained in beer
    Uploaded 01/03/2011
    Suppose that every day, ten men go out for beer and the bill for all ten comes to $100...

    If they paid their bill the way we pay our taxes, it would go something like this...

    The first four men (the poorest) would pay nothing.
    The fifth would pay $1.
    The sixth would pay $3.
    The seventh would pay $7..
    The eighth would pay $12.
    The ninth would pay $18.
    The tenth man (the richest) would pay $59.

    So, that's what they decided to do..

    The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80.

    The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men ? How could they divide the $20 windfall so that everyone would get his fair share?

    They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.

    So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.

    And so the fifth man, like the first four, now paid nothing (100% saving).
    The sixth now paid $2 instead of $3 (33% saving).
    The seventh now paid $5 instead of $7 (28% saving).
    The eighth now paid $9 instead of $12 (25% saving).
    The ninth now paid $14 instead of $18 (22% saving).
    The tenth now paid $49 instead of $59 (16% saving).

    Each of the six was better off than before. And the first four continued to drink for free. But, once outside the bar, the men began to compare their savings.

    "I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,"but he got $10!"

    "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!"

    "That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!"

    "Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!"

    The nine men surrounded the tenth and beat him up.

    The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

    And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat

    David R. Kamerschen, Ph.D.
    Professor of Economics.

    For those who understand, no explanation is needed.
    For those who do not understand, no explanation is possible.
    Old Geezer
    12th Sep 2017
    Just shows how important the rich and those who succeed are in our society. Take them away as the rest are I big trouble.

    I remember posting that myself awhile back too.
    12th Sep 2017
    :) Wise man OG
    12th Sep 2017
    Rosret you are spot on this Federal government and their dumb rule changes have to be watched as close as possible .My industry super fund does not make donations to a union and none do. Thank god for industry super as the Retail funds are a rip off.
    12th Sep 2017
    I accessed my Super a couple of years after I retired, it was only about $51 thousand, tax hadn't been paid on the way into the Super Fund,( which I didn't know ) so I had to pay that, fair enough. But then the remains of the Super was added to my Pension, and Taxed again. Don't tell me that is right, but the Tax Office say's it was.
    12th Sep 2017
    Suzie'Q you need some financial advice. If you draw down less than the taxation threshold it won't be taxed. OG may like to correct me if my understanding is wrong.

    12th Sep 2017
    Government has to fund its programs
    Tax on super is minimal and the wealthy again pay more than their fair share
    All good in my opinion
    12th Sep 2017
    The answer for many may be to investigate the re-contribution rule, whereby you can re-contribute some or all of the taxable portion of your super/AP... of course certain rules do apply but if you are able to do it you may find it worthwhile from an estate planning view point to reduce or eliminate tax payable upon death
    12th Sep 2017
    When Costello was Treasurer they wanted us to put much as possible into super to avoid the need for pension supplements. I don't know why they have done an about face. I can only imagine the banks have put pressure on the parliamentarians to keep their nest egg full.
    13th Sep 2017
    The banks are quite annoyed that SMSFs and Industry funds are beating them at their own game for once and they are missing out on profits they expected to get from compulsory super for PAYG workers.

    Notice self employed and business class are not required to save for their own retirement.
    13th Sep 2017
    At inception, government didn't realise how much money would be tied up in super and not going into the economy. The economy is flagging and Government want more money, ergo, messing with super and investment properties (negative gearing etc.).

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