When and how is your super taxed
Generally, there are three stages at which your super might be subject to tax.
1. When contributed to your account:
Contributions that your employer makes to your super (including the 9% Superannuation Guarantee and salary sacrifice) are generally taxed at 15%. This can be a tax-effective way to contribute to super, because most people's marginal tax rate is much higher than 15%. Also known as concessional contributions they are subject to a $25,000 cap each year for people under age 50. If you are over age 50, your concessional contributions cap is $50,000 per year until 30 June 2012 when it reduces to $25,000. Contributions over these limits will be taxed an additional 31.5%.
Contributions that you make (from your after-tax salary) are generally not subject to any tax when paid into Cbus. However, there are limits on the amount of after tax contributions (also known as non-concessional contributions) you can make. These are $150,000 a year ($450,000 over three years, provided you are under age 65). Any amounts you contribute over these limits will be taxed at 46.5%.
2. The investment earnings on your account:
The investment earnings on your Cbus' account are taxed at up to 15% (it’s often much less due to tax rebates and credits). This can compare well with the individual marginal tax rate that applies to earnings on other investments you might have (for example, a rental property, or shares).
3. When you withdraw money from your account:
In order to find out exactly what you can withdraw from Cbus, and what (if any) tax will apply you need to request a Benefit Quote from Cbus. You can do this by calling 1300 361 784.
- If you’re over age 60, your benefit will generally be tax free, regardless of how it is paid.
- If you’re under age 60, but over your preservation age (generally age 55), you will receive the first $150,000 of your lump sum benefit tax free. Any amount over the $150,000 will be taxed at 15%*.
- If you have not yet reached your preservation age (generally age 55) and you’re withdrawing an amount of your super under special circumstances (for example - financial hardship), you will be taxed at 20%* on the taxable component of your lump sum. Give us a call if you’re unsure.
- If you are looking to transfer your super into an income stream, see the Cbus Super Income Stream Taxation section.
Please note: The $150,000 low rate cap is indexed annually in line with Average Weekly Ordinary Time Earnings 'AWOTE'.
*Plus Medicare levy.
This information has been provided as a guide only, and is not a substitute for professional taxation advice. As the tax rules in relation to superannuation can be complex we suggest that you seek professional advice before making any decisions. For questions about tax on superannuation, we strongly advise you to contact the Australian Tax Office (ATO) on 13 10 20.