how super is taxed

how super is taxed

30 September 2022
The information in this document forms part of the following Product Disclosure Statements:
HESTA Product Disclosure Statement issued 30 September 2022
HESTA Personal Super Product Disclosure Statement issued 30 September 2022
HESTA Corporate Super Product Disclosure Statement issued 30 September 2022

commence the retirement phase after 1 July 2021

Important and your total super balance (across all your
The information in this document relates to super funds) is $1.7m or more at the start of this
how super is taxed in the 2022/23 financial financial year, you should seek financial advice
year. before you contribute any after-tax earnings to
your super as there may be tax consequences. Any
after-tax contributions made over this cap will be
Understanding how taxes work taxed at the highest marginal tax rate.
will help you build your super You can withdraw excess after-tax contributions
above the cap along with 85% of any associated
Tax on contributions to a super fund
earnings, however, the associated earnings will be
The rate of tax on super contributions depends on included in your assessable income and taxed at
the type of contribution being made, the amount your marginal tax rate, including Medicare Levy.
of contributions made in the financial year, and
the amount of your total income. The annual cap is indexed in line with average
weekly ordinary time earnings (AWOTE).
Before we get started, here are some handy
definitions: Before-tax contributions
After-tax income – your take-home pay. That is Also called concessional contributions, before-tax
the money you see deposited in your bank account contributions include employer contributions and
when you get paid, and tax has already been salary sacrifice amounts. Where your employer
taken out. pays for your insurance, the amount will be treated
as a concessional contribution and go towards
Before-tax income – your total salary, before your your contributions cap.
employer takes out tax.
Before-tax contributions are generally taxed at
After-tax contributions 15% when deposited into your super account.
Contributions made from your take-home pay (also HESTA is able to claim a tax deduction for certain
called non-concessional contributions) and include costs of operating the fund. When the fund receives
personal contributions and spouse contributions. a tax deduction for insurance costs, the benefit of
Generally, they are not taxed when deposited into the deduction is passed on to insured members in
your super fund, as you’ve already paid income the form of a reduction in the tax on contributions
tax on this money. payable. When the fund receives a tax deduction
for administration and operational costs, these
There is a limit (called a non-concessional are retained in the fund development reserve
contribution cap) of $110,000 p.a. for people under which supports the financial costs of operating the
age 751. Eligible individuals may ‘bring forward’ fund.
some future years contributions cap and make a
larger contribution. Eligibility to ‘bring forward’ will If your adjusted taxable income (including salary
depend on your age and total super balance. Go sacrifice) for a financial year is greater than
to ato.gov.au/super to see if you’re eligible. If you $250,000, your concessional contributions will be

1 The contribution caps are applied per person, not per fund, which means contributions made to other funds are included in the cap. Excess concessional contributions
will also count towards your non-concessional contribution cap if not withdrawn. Super funds are required to report all contributions to the Australian Tax Office
(ATO), and the ATO determines whether you have exceeded a contribution cap. A person age 75 and over is ineligible for non-concessional contributions see How
super works at hesta.com.au/pds

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subject to an additional 15% tax, effectively meaning Tax on lump-sum payments from super
you pay up to 30% tax on your concessional
Payments from your super account have a tax-free
contributions.
and a taxable component. Withdrawals are taken
There is a limit (called a concessional contribution proportionally from the tax-free component and the
cap) of $27,500 p.a. regardless of your age. taxable component, based on how much is in each
If your total super balance is less than $500,000, you component. You cannot choose to have a partial
will be able to carry forward any unused concessional withdrawal from one particular component.
contributions on a rolling basis, from 1 July 2018, for up Tax-free component
to five years. The first year you will be able to carry The tax-free component of your super is generally
forward contributions is the 2019-20 year of income. made up of your non-concessional contributions plus
Excess before-tax or concessional contributions are any crystallised tax-free amounts at 30 June 2007. If
included in your assessable income for the your super is released due to permanent incapacity,
corresponding financial year and taxed at your the tax-free component will be increased if you are
marginal tax rate. under age 65. No tax is payable on the tax-free
component.
Benefits of contributions For more information about crystallised amounts or
The rate at which before-tax contributions are permanent incapacity payments, call us on 1800 813
taxed may be lower than your income tax rate 327.
Personal after-tax contributions may also attract Taxable component
the government super co-contribution. For more The taxable component is the total of your benefit less
information, see How super works at the tax-free component. The rate of tax on the taxable
hesta.com.au/pds component (see table on page 3) depends on how
your super is being paid out.
Spouse contributions may be eligible for the
spouse contribution tax offset 1. Retirement payments – there are different tax
rates for lump-sum payments depending on your
You may be able to claim a tax deduction on
age and the amount. There is no tax on payments
personal contributions made to HESTA. For
if you are over 60.
example, this may be the case if you are
self-employed or your employer does not allow 2. Rollover between super funds – there is no tax
salary sacrificing. For details, call us on 1800 813 payable if you transfer money from one super
327 fund to another, if both funds are based in
Australia. The only exception is where the amount
To learn more about the benefits of extra super
transferred contains an untaxed element, which
contributions, see How super works at
may occur when transferring benefits from certain
hesta.com.au/pds
public sector super funds.
Use the calculators to see how contributions 3. Departing Australia Superannuation Payments
could work for you at hesta.com.au/calculator (DASP) – if you’re a temporary resident who has
departed Australia, a different tax rate will apply.
Tax on earnings in super 4. Terminal illness payments – if your super is
Investment earnings in super are taxed at a maximum released due to terminal illness, there is no tax on
rate of 15%. The final tax rate may be less than 15% payments.
after tax concessions, offsets and credits are applied. 5. Death benefit payments – tax on death benefits
The tax is deducted from investment earnings before depends on whether the benefit is paid to a
unit prices are calculated. dependant or a non-dependant. The taxable
The tax rate on investment earnings in super may be component of a death benefit may include an
lower than the tax rate on your investment earnings untaxed element where the proceeds of death
outside of super (including interest on money in a bank insurance have been paid into the account.
account), which would be at your income tax rate.
Tax file number (TFN)
It’s beneficial to provide your TFN to your super fund.
If you don’t, concessional contributions into your super
and benefit payments from your super may be taxed
at the highest marginal tax rate. Your fund will also
not be able to accept after-tax contributions.

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 Taxable component of a lump-sum payment Tax rate1
1. Retirement payments
Paid before preservation age 22%

Paid at or above preservation age but before age 60 0% (up to $230,000)

17% (over $230,000)
Paid after age 60 0%

2. Rollover between super funds

Taxed element 0%

Untaxed element 0% (up to $1.65m)

47% (over $1.65m)
3. Departing Australia Superannuation Payments 35% Taxed Element
45% Untaxed element
4. For Working Holiday Makers2 65%
5. Terminal illness payments 0%
6. Death benefit payments
Paid to a dependant3 0%

Taxed element paid to a non-dependant 17%

Untaxed element paid to a non-dependant 32%

1 Tax rates include Medicare levy of 2%.

2 The 65% rate will apply to your total DASP amount, including any super you may have earned while working
under a different visa.
3 A dependant for tax purposes is defined as a spouse (which includes someone who is not legally married to
you but lives with you on a genuine domestic basis in a relationship as a couple), a child less than age 18, any
other person with whom you have an interdependency relationship, or any other person who is dependent.
Unless they meet these criteria, your nominated beneficiaries may not be classified as dependants for tax
purposes. See at hesta.com.au/pds for more details about dependants.

How can we help?

One of the benefits of your HESTA membership is access to super advice.
The rules regarding tax and super are complex. How these rules will affect you will depend on your individual
circumstances.
To make an appointment, visit hesta.com.au/advice or call 1800 813 327.

contact us
[email protected] | 1800 813 327 | Locked Bag 5136, Parramatta NSW 2124 | hesta.com.au

Issued on 30 September 2022 by H.E.S.T. Australia Ltd ABN 66 006 818 695 AFSL 235249, the Trustee of HESTA ABN 64 971 749 321. To
access the other parts of the relevant Product Disclosure Statement (PDS) visit hesta.com.au/pds or call 1800 813 327. This document does
not relate to the HESTA Income Stream. Refer to the HESTA Income Stream PDS for information about that product. This information is of
a general nature. It does not take into account your objectives, financial situation or specific needs so you should look at your own financial
position and requirements before making a decision. You may wish to consult an adviser when doing this. Before making a decision about
950 09/22

HESTA products you should read the relevant PDS, and consider any relevant risks (hesta.com.au/understandingrisk). Information in this
document may change from time to time and may not be up-to-date at the time you receive the PDS. Information changes that are not
materially adverse may be updated on our website hesta.com.au A paper copy of the updated information will be made available to
you upon request, without charge, by calling 1800 813 327.
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