Superannuation is generally taxed differently from investments held outside super. The tax treatment will depend on the type of contribution, how your money is invested and when and how you access your benefits.

Broadly, tax can apply at three stages.

Stage 1: When money is contributed to your super

The tax treatment of a superannuation contribution depends on the type of contribution and the member’s circumstances.

Concessional contributions generally include compulsory employer contributions, salary-sacrifice contributions and personal contributions for which a valid tax deduction is claimed. These contributions are generally taxed at 15% within the superannuation fund. Additional Division 293 tax may apply to certain higher-income individuals.

Non-concessional contributions are generally personal contributions made from after-tax money for which no tax deduction is claimed. These contributions are generally not taxed when received by the fund, but they remain subject to the applicable non-concessional contributions cap.

Transfers from foreign pension or superannuation funds are subject to separate Australian tax and contribution rules. The treatment can depend on when you became an Australian tax resident, the timing and amount of the transfer, the amount of any applicable fund earnings and whether a valid election is made for the Australian superannuation fund to pay tax.

Part of a foreign transfer may count towards your non-concessional contributions cap, while another part may be treated differently for Australian tax purposes. You should obtain advice from a registered tax adviser with relevant foreign-pension experience before arranging a transfer.

Stage 2: Investment earnings within your super

While your super is in the accumulation phase, investment earnings are generally taxed at a maximum rate of 15% within the fund.

Capital gains on investments held by the fund for more than 12 months may qualify for a one-third capital gains tax discount, resulting in an effective tax rate of up to 10%. The actual tax applied to your account can depend on the investments held, transactions undertaken and the Fund’s tax-allocation process.

Investment earnings supporting an eligible retirement-phase pension may be exempt from tax, subject to the transfer balance cap and other applicable requirements.

Stage 3: When you access your super

Superannuation is generally preserved for retirement and can only be accessed after you satisfy a condition of release.

Benefits paid from a taxed superannuation fund are generally tax-free once you reach age 60. If you access super before age 60 under an applicable condition of release, tax may apply depending on your age, the payment type and the taxable and tax-free components of your benefit.

Different rules may apply to transition-to-retirement income streams, temporary residents, death benefits and other special circumstances. UK tax or reporting requirements may also continue to apply to benefits originating from a UK tax-relieved pension transfer.

Important information

Superannuation and foreign-pension taxation is complex and depends on individual circumstances. Contribution caps, the transfer balance cap and tax thresholds may change over time.

The information above is general information only and does not take into account your objectives, financial situation or needs. Consider obtaining advice from a licensed financial adviser and a registered tax adviser before making a contribution, transferring a foreign pension or accessing your super.

For further information, visit the Australian Taxation Office guidance on contribution caps and tax on super contributions and transfers from foreign super funds.