In a new measure announced in the 2016 Budget, the higher income amount (the threshold at which high-income earners pay Division 293 tax on their concessional taxed contribution to superannuation) has been reduced from $300,000 to $250,000 with effect from 1 July 2017. See Treasury Laws Amendment (Fair and Sustainable Superannuation) Bill 2016.
The Div 293 tax threshold amount remains at $250,000 for 2018-19.
When deductible contributions to a super fund are made, the initial tax benefit is the difference between the contributions tax rate (15% usually) and the individual’s marginal tax rate – which at the time of writing ranges from 32.5% to 47% on incomes over $37,000.
Lower income earners
For lower income earners (less than $37,000 a year) from 1 July 2012 until 30 June 2017 the Low Income Superannuation Contribution (“LISC”) scheme was in place, which is a refund of the 15% contributions tax up to a maximum of $500. The Mining Tax repeal measures which gained the approval of Federal Parliament on 2 September 2014 provide for the removal of LISC from 1 July 2017.
From 1 July 2017 the Low Income Superannuation Tax Offset commenced, which operates in similar terms to effectively refund the 15% contributions tax to a maximum of $500.
Non-tax deductible contributions, (also referred to as undeducted or non-concessional contributions) are not taxed at all, and ultimately can be withdrawn tax free. But of course they must be paid for out of the member’s after-tax earnings, so the government coffers don’t miss out in that sense.
There are times when it’s convenient or tax-preferable to make super contributions without claiming a tax deduction. This is to take advantage of a complying super fund’s investment income being taxed at the concessional rate of 15%, as well as (normally) being entitled to dividend franking credits. This can result in the overall tax rate being much than it would have been on the same amount of investment income earned directly in the hands of an individual taxpayer.
Contributions Tax Is Paid By The Super Fund (not you)
Any tax on superannuation contributions is normally paid by the super fund.
Thus in cash flow terms the tax normally comes from the contribution itself or the fund, and won’t impact your personal income tax assessment or cash flow.
Contributions are generally part of a complying super fund’s tax position which treats the incoming contributions as part of its income, generally taxed at 15%, but with tax rates ranging from 47% to 93% if the lower tax qualifying conditions are not fully met.
Superannuation Contributions Taxing Rates – a Summary3
Complying concessional (tax deductible) contributions within allowable limits to a complying fund (non-high income earners)
|“Breach” circumstances, such as contributions in excess2 of specified limits before 1 July 2013, or to a non-complying fund||47%(49% from 2014-15 to 2016-17)|
|From 1 July 2012:|
Higher income earners1 concessional contributions within allowable limits to a complying fund – on the amount of the over-$300,000 ($250,000 from 1 July 2017) slice of (income + contributions) – Division 293 assessments
|Refunded contributions since 30 June 2013 (see excess)||Marginal rate + interest|
1 Applies to the excess over $300,000 ( $250,000 from 1 July 2017) the income for surcharge purposes (other than reportable super contributions) Plus low tax contributions. For further info,see the EM for the Bill which passed through Federal parliament in late June 2013.
3 Other than contributions, this article does not deal with the taxing of superannuation funds as such, which can derive other kinds of income taxed at varying rates according to circumstances and status.
This page was last modified 2018-03-05