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Understanding the Basics of Tax on Superannuation

Posted 11 Feb

Understanding the Basics of Tax on Superannuation

Whether you’re starting in the workforce, nearing retirement or actively withdrawing from your super fund, it's important to understand the tax on your superannuation. You can make the most of super with some simple strategies. Understanding how much tax you pay on superannuation contributions and withdrawals is a great place to start.

The amount of tax depends on several factors, and it's possible to minimise the amount you pay by understanding how the tax on super works. Tax on super is generally a lower rate than the tax on your income, and by using a few smart strategies, you can both minimise your tax bill and maximise your super investment.

The tax on super rules are the same for all super funds, whether self-managed, an industry fund, a default employer fund or another regulated fund.

Tax on Contributions

Contributions made to your super fund before tax are taxed at a flat rate of 15% and called concessional contributions. This applies to employer super guarantee contributions, salary sacrifice and personal deductible contributions. As your super investments grow, you’ll also pay 15% tax on the investment earnings in your super fund.

After-tax contributions are call non-concessional contributions and are not taxed. If you make contributions from your after-tax income, or you make other contributions not classed as a tax deduction, these amounts won’t be taxed in the super fund.

Carry Forward Provisions to Minimise Tax

There are limits to how much you can contribute to your super fund each year. Care should be taken not to exceed these limits to avoid receiving an excess contributions tax bill.  However, from 2020, new rules allow you to make extra concessional contributions in some situations without having to pay additional tax. Depending on your Total Superannuation Balance, you may be able to contribute more than the concessional contribution cap without extra tax charges, however care must be taken not to exceed the allowable limit.

Tax on Withdrawals

Your preservation age, how the funds are paid to you, the type of income stream and other factors affect the tax on super withdrawals. Some withdrawals may be taxed, and others are tax-free.  For example, after-tax contributions may be tax-free when you withdraw funds, but concessional contributions are taxable.

Want to Make the Most of Your Super?

Tax on super can be complicated! We’d love to review your super and discuss ways to minimise the tax on super contributions and withdrawals. You may be able to receive great tax benefits by making extra contributions while still working and possibly utilising the carry forward provisions.

Contact your WDF Professional team member if you would like to discuss further how we can help you. Phone 02 6921 5444 or email accountants@wdf.com.au

Mal Plane

Superannuation Specialist



As accountants based in Wagga Wagga, we don't just crunch numbers and put figures in boxes, we provide a carefully researched and tailored accounting solution that suits each of our clients.



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