Super has the benefit of lots of tax concessions and is regarded as one of the most tax effective investment vehicles.

For example, the 15% tax rate that normally applies to your employer’s super contributions (including salary sacrifice contributions by you) is lower than the rate you would have paid if you received the money as income through your salary. Generally, most super is concessionally taxed at a flat rate of 15% at three different times:

on taxable contributions
on earnings
on the taxable component of your final payout.

Concessionally means it’s discounted to normal tax rates. This is where the terms concessional contributions and non-concessional contributions come from.

Tax and limits on contributions

The Government has set limits on the amount you can contribute to your super each year at a reduced tax rate. If your contributions exceed this limit, you may have to pay extra tax on the excess contributions.

The following tax rates may change, depending on Government limits on contributions and whether the Fund holds your Tax File Number (TFN).

Types of contributions	Tax rate
After–tax contributions to your account or a spouse account	0%
Employer contributions (including contributions from your before-tax salary)	15%
Before-tax contributions, for which a tax deduction is claimed	15%

Personal before-tax contributions (employer contributions including salary sacrifice)

Generally, you'll only be taxed at 15% for the first $25,000 of before-tax contributions to your super each year (this applies across all your super accounts for which a TFN is held by the fund). This includes salary sacrifice contributions as well as compulsory and voluntary employer contributions. Any before-tax contributions received above this $25,000 will be taxed at the highest marginal rate of 46.5% including the Medicare levy. The good news is, until 30 June 2012, there are transitional arrangements that allow anyone aged 50 or over to make up to $50,000 of before-tax contributions at the concessional tax rate of 15%. So if you turn 50 during this period, you'll benefit from the higher limit.

Personal after-tax contributions

You can make up to $150,000 of personal after-tax contributions to your super every year (this applies across all your super accounts).

If you are aged under 65 this can be averaged over a three year period. So you can contribute up to $450,000 over three years, rather than a maximum of $150,000 a year.

Any after-tax contributions above these limits will be taxed at the highest marginal rate of 46.5% including the Medicare levy.

Tax on investment returns

While your super is in the Fund, Health Super must pay tax on any investment returns. The current rate of tax is 15% (but it may be less after rebates and credits are taken into account). Health Super manages all the tax requirements relating to super contributions and super investment earnings. Any taxes are taken into account when investing super contributions and reporting investment returns to members.

Tax on benefits (other than death benefits)

The tax treatment of benefits paid as a lump sum (from a taxed source like Health Super) is summarised in the following table:

Age	Lump sum
Age 60+	Tax free
Between preservation age & age 60	Exempt component is tax free First $145,000 of taxable component is tax free Taxable component above $145,000 is taxed at 15% plus Medicare levy.
Less than preservation age	Exempt component is tax free Taxable component is taxed at 20% (plus Medicare levy).

As well as your age, the tax on your super benefit can also depend on:

if you choose to receive your benefit as a lump sum or as a pension
if your benefit is received for retirement, death or disability
whether your benefit is paid to yourself, one of your dependents or non-dependents
whether the fund holds your TFN.

For more information on tax and super visit the ATO website.

Need help?

Health Super Financial Planning can provide you with access to a qualified Health Super financial planner at a reduced rate. To start your retirement planning and to consider your future years call Health Super Financial Planning on 1300 780 223.

Health Super Financial Services Pty Ltd (trading as Health Super Financial Planning) ABN 37 096 452 318, AFSL No. 240019 is a wholly owned subsidiary of Health Super Pty Ltd (the Trustee of Health Super). Health Super Pty Ltd pays Health Super Financial Planning (HSFP) half of the annual 1% account keeping fee charged for Health Super’s Pension products. Health Super Pty Ltd also pays a variable monthly amount to HSFP to conduct member seminars. Health Super is not a representative of HSFP and receives no commission when making a referral to this service.