Superannuation is a long-term and tax-effective way to save for retirement, which means the savings are generally locked up until then.

Some super contributions and withdrawals are taxed and others are not. The following is an overview of how superannuation is taxed at different stages. You should refer to the Australian Taxation Office website for the most current information.

Tax on contributions

The tax on contributions depends on whether they’re concessional or non-concessional. Both types of contributions have caps that, if exceeded, means you pay extra tax. The limits are:

 Limit (cap) 2017/2018Tax rate if you go over the cap
Concessional contributions limit$25,000 paAmounts over $25,000 will be added to your assessable income and taxed at your marginal tax rate
Non-concessional contributions limit$100,000 pa 49% for amounts over $100,000.

Concessional contributions generally attract tax at a rate of 15% up to the limits above. Non-concessional contributions attract no tax up to the limit.

People under age 65 can bring forward two years of future non-concessional contributions averaged over a three-year period (total limit of $300,000 over a three-year period).

The contribution and bring forward available to members under 65 is outlined in the following table.

Total Superannuation BalanceContribution and bring forward available
Less than $1.4 millionAccess to $300,000 cap (over 3 years)
$1.4m and less than $1.5 millionAccess to $200,000 cap (over 2 years)
$1.5m and less than $1.6 millionAccess to $100,000 cap (over 1 year)
$1.6 million or moreNil

The Total Superannuation Balance is determined on 30 June of the previous financial year.

Transitional arrangements apply to individuals who brought forward their non-concessional contributions cap in the 2015-16 or 2016-17 financial years. For more information click here.

Tax on investment earnings

A super fund’s earnings are taxed at a lower rate than most other forms of savings. The current maximum rate is 15%.

Tax on lump sum withdrawals

Lump sum withdrawals will be taxed depending on your age and components of your super account. You’ll have a tax-free and a taxable component.

Tax rules in relation to benefits withdrawn from super are complex, so you should seek professional advice before requesting a withdrawal.

The following, however, provides general tax information on withdrawals:

Tax payable on lump-sum withdrawals
*The low rate threshold of $200,000 for the 2017/2018 financial year.
^Plus Medicare levy.
ComponentMaximum rate of tax including applicable levies
Tax-free (includes amounts such as non-concessional contributions, pre-July 1983 amounts, etc.)0%
Taxable (includes amounts such as concessional contributions)Aged 60 and over0%
Preservation age to 59Amount up to low rate threshold*0%
Amount over low rate threshold*15^%
Under preservation age20^%

Tax on death benefits

Where a lump sum death benefit is paid to a dependent, the benefit is usually tax-free. The definition of a dependent can be found here.

A death benefit paid to a non-dependent can only be paid as a lump sum. In this instance, the tax-free component remains tax-free, and the taxable component is taxed at 15%, plus levies.