Superannuation is a tax advantaged retirement savings arrangement where employers, employees and those who are self-employed make contributions for fund members. The reason superannuation is considered to be a tax advantaged arrangement is because tax concessions are available at the time some contributions are made to the fund, the income on the fund's investments is taxed concessionally and lump sums or pensions can be taxed at low rates or tax free.
Concessional contributions include:
- Contributions made by your employer, either:
- employer compulsory super guarantee (SG) contributions
- contributions made under a salary sacrifice arrangement
- Personal contributions claimed as a tax deduction.
For most people, concessional contributions are taxed at 15%. There is a maximum of $25,000 that can be contributed each year. Any contributions above this amount are included in the member's assessable income and taxed at their marginal tax rate.
Non-concessional contributions are personal contributions (made from after tax dollars) where the member does not claim a tax deduction. No tax is applied to non-concessional contributions up to the cap amount.
Earnings within an SMSF
For a fund that is in the accumulation phase, income earned on investments within an SMSF is taxed at 15%. Franked dividends paid by an Australian company may entitle the SMSF to a tax credit, reducing their overall income tax rate. Capital gains on assets held for 12 months or more are taxed at 10%. Capital gains on assets held for less than 12 months are taxed at 15%.
For funds that are in the pension phase, income earned on investments is not taxed, up to the Members Transfer Balance Cap.
Superannuation lump sum payments
A superannuation lump sum paid to a member aged 60 years or over is tax free. But for those under 60 years old, some tax may be payable. It depends on the amount and the member's age.
A superannuation lump sum benefit can comprise of both taxable and non-taxable components, depending on the composition of the Member's benefit.
Pensions paid to a member 60 years or over are tax free. For persons under 60 years old, the taxable pension is taxed at their personal marginal tax rates and a tax offset may be available.
Don't take your money from the fund early
If you take your money from your SMSF earlier than the superannuation rules permit the amount withdrawn can be taxed at penalty rates, the fund loses its tax concessions and the trustees penalised for allowing the money to be released early. It is illegal to access superannuation early.
Still want to learn more about SMSFs?
It’s important to consider your particular circumstances and read the relevant Financial Services Guide (including the Terms and Conditions) before deciding what’s right for you. This information hasn’t taken your circumstances into account. On this page ‘you' and ‘your’ means the trustee(s) of your SMSF. As a trustee of your SMSF you are ultimately responsible for your SMSF, including the investment decisions that you make for your SMSF. If you need assistance, please seek a financial adviser. Any tax information provided is general, intended as a guide only, and based on our understanding of taxation laws current at date of publication. It is not a substitute for specialised taxation advice or an assessment of liabilities, obligations or entitlements that arise, or could arise, under tax law. We recommend consulting a registered tax agent / tax professional. Consider the SMSF Administration Solutions Pty Ltd Financial Services Guides (including Terms and Conditions) for information about our services, fees, and the remuneration and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.
The AMP SMSF Administration service is offered by SMSF Administration Solutions Pty Ltd ABN 76 097 695 988 AFSL 291195 trading as AMP SMSF Administration, an AMP Group Company.