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Superannuation 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 rate of 15% at three different times:
'Concessionally' means it’s discounted to normal tax rates. This is where the terms concessional contributions and non-concessional contributions come from.
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.
Additional tax may apply, 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% |
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 subject to tax at the rate of 46.5% (including the 15% rate that otherwise applies). 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.
You can make up to $150,000 of personal after-tax contributions to your super every year (this applies across all your super accounts).
Any after-tax contributions above these limits will be taxed at the highest marginal rate of 46.5% including the Medicare levy.
While your super is in Health Super, we 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). Any taxes are taken into account when investing super contributions and reporting investment returns to members.
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 $165,000* of taxable component is tax free Taxable component above $165,000* 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). |
* Threshold applies 2011/2012 and is subject to change
As well as your age, the tax on your super benefit can also depend on:
For more information on tax and super refer to the Fact Sheet: Tax or visit the ATO website.
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 ABN 37 096 452 318, AFSL 240019 trading as Health Super Financial Planning (HSFP) is wholly owned by the FSS Trustee Corporation ABN 11 118 202 672 AFSL 293340 Trustee of the First State Superannuation Scheme ABN 53 226 460 365.
The Trustee pays HSFP half of the annual 1% account-keeping fee collected on all Health Super Account Based Pensions. The Trustee also pays a variable monthly amount (calculated on a cost recovery basis) to HSFP to conduct member seminar programs. The Trustee is not a representative of HSFP and receives no commissions when making referrals to this service. To obtain further information about the services provided by HSFP, contact HSFP direct by telephoning 1300 780 223. Alternatively, visit HSFP’s website at hsfp.com.au