Super Tax at a Glance

Superannuation offers significant tax advantages compared to holding investments in your personal name. The tax treatment varies depending on whether your super is in accumulation phase or pension phase.

Contributions Tax

Concessional Contributions Tax

Employer SG contributions and salary sacrifice: taxed at 15%
Personal deductible contributions: taxed at 15% when received by the fund
Division 293 surcharge: Additional 15% for high-income earners (income + contributions > $250,000) = total 30%

Non-Concessional Contributions Tax

After-tax contributions: nil tax when entering super (already taxed in your hands)
No deduction is claimed, so no additional tax applies

Earnings Tax in Accumulation Phase

Investment earnings (dividends, interest, realised capital gains): taxed at up to 15%
Capital gains on assets held more than 12 months: taxed at effective rate of 10% (after CGT discount)
Imputation credits (franking credits) from Australian shares can reduce tax further

Earnings Tax in Pension Phase

Investment earnings on assets supporting an income stream in retirement: tax-free (0%)
This is a massive tax advantage — earnings that would be taxed at up to 47% personally are entirely tax-free
There's a cap: the Transfer Balance Cap ($1.9 million in 2024-25) limits how much you can move to pension phase

Division 293 — High-Income Surcharge

If your income for surcharge purposes (adjusted taxable income + concessional contributions) exceeds $250,000, you pay an additional 15% on concessional contributions:

Total tax on concessional contributions: 30% (standard 15% + Division 293 of 15%)
The surcharge applies to the lesser of your total concessional contributions, or the excess over $250,000
You can elect to pay the Division 293 amount from your super fund or personally

Tax on Withdrawals

Lump Sum Withdrawals (Under 60)

Tax-free component: No tax (includes non-concessional contributions + certain other amounts)
Taxable component (first $235,000 in 2024-25): Taxed at 0% (low-rate cap)
Taxable component (above cap): Taxed at marginal rate plus Medicare Levy (no Medicare Levy surcharge)

Lump Sum Withdrawals (60+)

Tax-free — no tax on lump sum withdrawals

Income Streams

Under 60: Taxed at marginal rate with a 15% tax offset on the taxable component
60+: Entire income stream is tax-free

Tax Strategies Using Super

Salary Sacrifice

Redirect pre-tax income to super (up to $30,000 cap). Tax saved: difference between marginal rate + Medicare Levy (up to 47%) and 15% inside super.

Spouse Contributions

Contribute to a low-income or non-working spouse's super and potentially claim an 18% tax offset on up to $3,000 contributed (max $540 offset per year).

CGT and Small Business Concessions

If you sell a small business, you may be able to contribute up to $1.9 million (lifetime cap) to super under the CGT cap — taxed at only 15%.

Downsizer Contributions

Sell your home (owned 10+ years) at age 55+ and contribute up to $300,000 per person. Outside standard caps and tax-free upon entry.

Tax Comparison Table

Personal tax rate (top): 47% (45% + 2% Medicare)
Super contributions tax: 15% (or 30% with Division 293)
Super earnings tax (accumulation): Up to 15% (10% for long-term CGT)
Super earnings tax (pension): 0%

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How Super Tax Flows Through the System

Super gets three separate tax treatments, and understanding the flow explains why the system is structured this way. Concessional contributions are taxed at 15% on the way in (30% if Division 293 applies). Investment earnings are taxed at 15% while your money is in accumulation phase. Then, once you move to pension phase after preservation age, earnings on the pension assets are tax-free, and from age 60 all withdrawals are tax-free. The government caps the amount you can move into the tax-free pension phase — the transfer balance cap is $2.1 million for 2026-27 — and any excess must stay in accumulation where earnings are taxed.

For a worker on the 37% marginal rate, every dollar of salary sacrificed to super saves about 24 cents of tax immediately, then the earnings compound at a 15% tax rate rather than their marginal rate — and in retirement, the whole pension stream is tax-free. That combination is why super is described as the most tax-effective savings vehicle most Australians will ever use.

Action Plan: Tax-Efficient Moves for 2026-27

Salary sacrifice up to the $32,500 concessional cap if your marginal rate is above 15%.
Consider spouse contributions — a contribution to a low-income spouse's super can earn the contributor an 18% tax offset (up to $540) if the spouse earns under the relevant threshold.
If 55 or older and downsizing, use the downsizer contribution ($300,000 per person) — it bypasses the contribution caps entirely.
If you have unused concessional cap and a TSB under $500,000, use carry-forward before 30 June to reduce taxable income.
In retirement, structure the move to pension phase to stay within the transfer balance cap and keep excess funds in accumulation deliberately.