Super and Tax Australia — Complete Tax Guides for Super Members

Super is one of Australia’s most tax-effective savings vehicles — but it’s also one of the most tax-complex. Tax applies at three different stages: when money goes in (contributions), while it grows inside the fund (earnings), and when it comes out (withdrawals). Understanding how each stage works helps you contribute effectively and avoid costly mistakes.

Stage 1: Tax on Super Contributions

Concessional (pre-tax) contributions

Concessional contributions — employer SG contributions, salary sacrifice, and personal contributions for which you claim a tax deduction — are taxed at 15% when they enter your super fund. This is called the contributions tax.

For most Australians, 15% is substantially lower than their marginal income tax rate (which ranges from 19% to 45%). The tax saving is the primary financial benefit of salary sacrificing into super.

Example: On a $100,000 salary, the marginal income tax rate is 32.5%. Salary sacrificing $10,000 into super:

• Tax in super: 10,000 × 15% = $1,500
• Tax at marginal rate (forgone): 10,000 × 32.5% = $3,250
• Annual tax saving: $1,750

The concessional contributions cap for FY2024–25 is $30,000 per year. Contributions above this cap are included in your assessable income and taxed at your marginal rate (minus a 15% offset for the tax already paid).

Division 293 tax — high income earners

High-income earners pay an additional 15% tax on concessional contributions, bringing the effective rate to 30%. Division 293 applies if your income plus concessional contributions exceed $250,000.

Who it affects: A person earning $245,000 and salary sacrificing $10,000 has income + contributions of $255,000 — Division 293 applies to the $5,000 above the threshold. They receive a Division 293 assessment from the ATO, which they can pay from their own pocket or from their super fund.

Non-concessional (after-tax) contributions

Personal contributions for which you don’t claim a tax deduction enter super tax-free (you’ve already paid tax on them). The non-concessional contributions cap is $120,000 per year (FY2024–25), or up to $360,000 under the three-year bring-forward rule.

Low Income Super Tax Offset (LISTO)

Australians earning under $37,000 pay a maximum contributions tax of 15% on their employer contributions — effectively the same rate or higher than their income tax rate. The LISTO offsets this by returning up to $500 per year directly to the super account of eligible low-income earners. This is calculated automatically by the ATO.

Stage 2: Tax on Super Earnings

While your money is invested inside your super fund (the accumulation phase), investment returns — interest, dividends, and capital gains — are taxed at a maximum rate of 15%.

For CGT on assets held more than 12 months, a one-third discount applies, effectively reducing the tax rate on long-term gains to 10%.

This is significantly below the marginal tax rate most Australians would pay if they held the same investments outside super. A taxpayer on the 45% marginal rate, investing outside super, pays 45% on dividends and 22.5% on long-term capital gains. Inside super, those same returns are taxed at 15% and 10% respectively.

Division 296 tax (from 1 July 2025)

The Australian Government passed legislation to impose an additional 15% tax on the earnings attributable to total super balances exceeding $3 million. This brings the effective earnings tax rate to 30% on the proportion of earnings related to balances above $3 million.

Key points:

• Applies from 1 July 2025 (FY2025–26)
• Assessed annually on earnings attributable to the balance above $3 million
• Includes unrealised gains (the super balance can increase via asset value increases even without asset sales)
• Can be paid from the super fund or from own funds

This affects a relatively small number of Australians (those with balances above $3 million) but represents a meaningful change to the superannuation tax concession for very large balances.

Retirement (pension) phase

Once you move your super into a pension (income stream) — typically after age 60 in retirement — investment earnings within the pension fund are tax-free. This is one of the most significant tax benefits in the Australian super system: your fund earns returns that are completely untaxed.

This is why drawing down super as a pension rather than taking a lump sum is often tax-advantageous — the remaining balance continues to earn tax-free returns.

Stage 3: Tax on Super Withdrawals

After age 60 (tax-free)

If you are aged 60 or over and have met a condition of release (retired, turning 65 regardless of work status), all withdrawals from a taxed super fund are completely tax-free — both lump sums and income stream payments.

This applies to most Australians — almost all funds are “taxed funds” meaning they have paid the 15% earnings tax along the way. (Untaxed funds — some older government super funds — have different rules.)

Between preservation age and age 60

Withdrawals between preservation age (60 for most Australians) and age 60 are taxed as follows:

• Tax-free component (after-tax contributions): Withdrawn tax-free
• Taxable component (employer contributions, salary sacrifice, and earnings): Taxed at your marginal rate minus a 15% offset, up to a lifetime low-rate cap ($235,000 in FY2024–25). Above this cap, the full marginal rate applies.

Death benefits to non-dependants

Super paid to a death benefits dependant (spouse, de facto partner, financial dependant, child under 18, or interdependent) is tax-free.

Super paid to a non-dependant (adult children, siblings) includes a taxable element taxed at 15% plus Medicare levy (17%). This is an estate planning consideration — structuring beneficiary nominations and the super balance composition (taxable vs tax-free components) can reduce the tax burden on death benefits.

Key Limits and Thresholds (FY2024–25)

Frequently Asked Questions

Do I need to declare my super on my tax return? Generally, no — standard employer contributions and earnings within super are handled automatically. However, you must declare personal contributions for which you’re claiming a deduction (using a Notice of Intent to Claim), excess contributions assessed by the ATO, and Division 293 amounts if you choose to pay them personally.

What is the Notice of Intent to Claim? If you make personal (after-tax) contributions to super and want to claim a tax deduction, you must submit a Notice of Intent to Claim (Section 290 notice) to your fund before the earlier of your fund filing your information with the ATO or your tax return lodgement date. Missing this deadline means you lose the deduction.

Is it better to put money in super or invest outside super? For most Australians, super offers a significant tax advantage over investing outside super — both on contributions (15% vs marginal rate) and on earnings (15%/10% vs marginal rate). The trade-off is that super funds are locked away until preservation age. The optimal answer depends on your income, age, and whether you need the funds before preservation age.

Super Tax Guides

• Super and Tax — Complete Guide for Australian Members
• Tax-Free Super Withdrawals After 60 — How They Work
• Low Income Super Tax Offset (LISTO)
• How to Claim a Tax Deduction on Personal Super Contributions (Section 290)
• Division 296 Tax — Super Balances Over $3 Million
• Excess Concessional Contributions — What Happens If You Go Over the Cap?
• Excess Non-Concessional Contributions — What Happens If You Go Over?

For advice tailored to your situation, speak with a licensed financial adviser or registered tax agent. You can find one through the ASIC financial advisers register or MoneySmart.

Co-Contributions — Boosting Low-Income Members

The government co-contribution scheme provides additional super contributions for low-to-middle income earners who make after-tax personal super contributions.

For FY2024–25, if your income is below $58,445 and you make an after-tax (non-concessional) contribution, the government contributes up to $500 to your super — at a rate of 50 cents for every dollar you put in.

Example: Income $45,000, personal contribution $1,000 → government co-contribution $500. This is a guaranteed 50% return on the contribution amount — one of the most reliable financial strategies available to low-income earners.

The co-contribution phases out as income rises above $43,445 and reaches zero at $58,445.

Spouse Contribution Tax Offset

If your spouse earns less than $40,000 per year, you can contribute to their super and claim a tax offset of up to $540 (18% of contributions up to $3,000). This benefits couples where one partner has a lower income and lower super balance — common in households with one primary earner and one part-time or stay-at-home partner.

The offset phases out between $37,000 and $40,000 of the spouse’s income, and the contributing spouse receives the offset (not the fund).

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