Tax & super

As an incentive to help you save for your retirement, superannuation enjoys low rates of taxation. Find out what taxes may apply to you.

What taxes apply to my super?

To encourage you to save for retirement, the government offers a number of tax incentives for your super. The following taxes may apply, depending on your personal circumstances.

Contributions tax

A contributions tax is applied to:

• all employer contributions
• any contributions you make from your before-tax (salary sacrifice) pay
• any amount you bring into UniSuper from an untaxed source such as rollovers from some government funds and employer eligible termination payments.

The current contributions tax rate is 15%.

Tax on your investment earnings

Investment earnings from your super investments are subject to tax, but at a lower rate earnings on non-superannuation investments.

The current tax rate on investment earnings in super is 15%, but may be lower after allowing for dividend imputation and other concessional treatments of certain capital gains.

Tax when you withdraw your super

You may have to pay tax when you are paid your super. UniSuper will normally deduct any applicable tax before paying your benefit.

• If you are aged 60 or over you will not pay tax when you withdraw your super, regardless of whether it is paid as a lump sum or pension.
• If you are aged under 60 tax may apply to your payment. If you convert it to a pension tax will stop being payable once you reach age 60. Please note: government legislation restricts when you can access your benefits. From a taxation point of view, the benefit will be divided into two components:
  • Tax-free component (as the name suggests) will be tax-free when you receive your benefit irrespective of your age.
  • Taxable component may be taxed, depending on your age. This consists of investment earnings, employer contributions and any other before-tax contributions made after 30 June 1983 for which a tax deduction has not been claimed.

The taxable component will be taxed in the following way:

Limits on your 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 these limits, you may have to pay extra tax on the excess contributions.

Before-tax contributions (employer and salary sacrifice)

Generally, you'll only be taxed at 15% for the first $50,000 of before-tax contributions to your super fund each financial year. This includes both salary sacrifice contributions as well as compulsory employer contributions.

Any before-tax contributions received above this $50,000 cap 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 $100,000 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 cap.

If you're a Defined Benefit Division member, Notional Taxed Contribution rates apply. Login to MemberOnline for more details.

Personal after-tax contributions

You can make up to $150,000 of personal after-tax contributions to your super fund every year.

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.

If you are aged over 65 you will need to satisfy the work test to make contributions. And, unfortunately, your contributions cannot be averaged out over three years.

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

Tax on rollovers

If you rollover your UniSuper benefit to another fund no take is payable.

You may pay tax when you withdraw the benefit in cash from the rollover fund.

If you roll over a benefit from an untaxed source (eg rollovers from some public sector funds, the rollover fund will deduct 15% contributions tax on receipt of the rollover.

Reasonable Benefit Limits

Reasonable Benefit Limits were abolished with effect from 1 July 2007.

Providing your tax file number

It's important to give UniSuper your tax file number (TFN). If you don’t, you could end up paying more tax than you need to on your super contributions. And, over time, this could make a big difference to your retirement savings.

It’s easy to provide your TFN.

Just login to MemberOnline or complete a Tax file number collection form.