Superannuation
Superannuation is a trust with special tax benefits. Known as a "super fund" the trustees of the fund must comply with certain rules to get the tax benefits. If they don’t comply, the highest tax rates will apply.
Why the special treatment?
To build retirement savings for the future. If every Australian has more super savings, there is less need for the government to support Australians in retirement.
What are the tax benefits?
A concessional rate of 15% rather than personal marginal tax rates that can go as high as 45%. When you retire, super savings can be rolled into a tax-free pension.
How can I contribute to super?
This is where it can get a little complicated and where a financial adviser can help you navigate the best options for you. There are many ways to get money into super. Here are the most common:
- Employer contributions: Mandatory contributions known as SG or employer contributions. Many employers will also make their own voluntary contributions for you. Both count towards your concessional contribution cap.
- Personal concessional contributions: Self-employed contributions to super pre-tax as well as employees making their own contributions as part of a salary sacrifice arrangement with their employer (pre-tax as well). These count towards your concessional contribution cap.
- Personal non-concessional contributions: This is when you have received your income, you have paid tax on it, and then you decide to contribute it to your super fund. These count towards your non-concessional contribution cap.
- Spouse contributions: You can make contributions on behalf of your spouse to their super fund if their assessable income (plus reportable fringe benefits) is less than $40,000. You can also get a tax offset up to $540 (for a maximum contribution of $3,000 pa) in your annual tax return. These count towards your spouse’s non-concessional contribution cap.
- Contribution splitting: You can split your concessional contributions each year with your spouse. Most super funds allow contribution splitting but check first. You can split the lesser of 85% of your concessional contributions or the cap.
- Government co-contributions: If you earn below a certain income threshold, the government will match 50% of your non-concessional contributions to super, up to a maximum of $500.
- Downsizer contributions: You can contribute up to $300,000 per person of your home sale proceeds to super. You must be 60 and over. Downsizer contributions don't count towards any contribution caps and contribution age restrictions and work test do not apply.
- First home super saver scheme: You can withdraw your non-concessional contributions and personal concessional contributions from super to buy your first home. The withdrawal is limited to $15,000 per financial year and $50,000 in total. Mandated and other types of contributions don’t qualify so check before making extra contributions for your house deposit.
- Rollover: Where you already have super savings and you transfer from one fund to another.
What are the rules?
Let's talk caps and calcs. Most individuals that work in Australia have super contributions paid into their account by their employer. To be eligible for these Superannuation Guarantee (SG) contributions, you generally need to:
- Be over 18 or,
- Be under 18 and work more than 30 hours per week.
Current SG contribution ratesare set to increase in the coming years:
Financial Year | SG Contribution Rate |
2020/21 | 9.5% |
2021/22 | 10.0% |
2022/23 | 10.5% |
2023/24 | 11.0% |
2024/25 | 11.5% |
2025/26 | 12.0% |
Eligibility to contribute to super
For voluntary employer or personal contributions, the following rules apply:
- No restrictions if person under age 67.
- If you're aged between 67-74, you can make non-concessional contributions and salary sacrifice contributions to your superannuation.
- If you're aged between 67-74, and you want to claim a tax deduction on your personal contribution, you must satisfy the work test requirement. Once attaining the age of 75 (and 28 days), no further voluntary employer contributions can be made.
- When you are aged 75 years or older, your fund can always accept compulsory employer contributions and downsizer contributions.
Work test
To meet the work test, you must be gainfully employed for at least 40 hours during a consecutive 30-day period in the financial year in which the contributions are made.
Work test exemption
To qualify for the work test exemption, you must have:
- Satisfied the work test in the financial year preceding the year in which you make the contribution.
- A total superannuation balance of less than $300,000 (this is your balance at 30 June of the previous financial year and you are not required to remain under the balance cap for the whole 12-month period).
- Not previously used the work test exemption (if you use the exemption to contribute and later return to work, you can’t use it again when you retire).
- From 1 July 2022 if you are under 75 years of age, you will no longer need to meet the work test exemption to make or receive non-concessional super contributions and salary sacrifice contributions.
Contribution caps
Contribution Type | Amount |
Concessional contributions | $27,500 p.a. |
Non-concessional contributions | $110,000 p.a. |
Higher contribution tax (earn over $250,000 pa) | +15% |
Lifetime CGT cap | $1.650 million |
Catch up concessional contributions
If your super balance is below $500,000 on 30 June of the previous financial year, you can carry forward any unused concessional contribution cap for up to 5 years (starting from 2017/18).
Bring forward rule non-concessional contributions
If you are under 75, you can bring forward an additional 2 years of your non-concessional cap into the current financial year. This means you can have a one-off cap of $330,000 in that year if you don’t make any further non-concessional contributions for two financial years.
Total super balance and non-concessional contributions
- You can only make non-concessional contributions if your total super balance (across all accounts) at 30 June of the prior year is less than the Transfer Balance Cap.
- Your ability to utilise the bring-forward rule is limited by your total super balance:
Total Super Balance | Bring-forward Limit |
Less than $1.48 million | $330,000 (3 years of non-concessional contributions) |
$1.48 million to $1.59 million | $220,000 (2 years of non-concessional contributions) |
$1.59 million to $1.7 million | $110,000 (1 year of non-concessional contributions) |
$1.7 million and over | Nill |
How Do I Access My Super?
To get access to your super, you must meet a condition of release such as:
- Retirement upon reaching preservation age (see table below).
- Turning 65 years of age.
Date of birth | Preservation age |
Before 1 July 1960 | 55 |
From 1 July 1960 to 30 June 1961 | 56 |
From 1 July 1961 to 30 June 1962 | 57 |
From 1 July 1962 to 30 June 1963 | 58 |
From 1 July 1963 to 30 June 1964 | 59 |
On or after 1 July 1064 | 60 |
There are also special conditions of release that may give you access to your super if you meet the criteria:
- Permanent incapacity
- Temporary incapacity
- Terminal illness
- Temporary visa holder departing Australia
- Severe financial hardship
- Compassionate grounds
Make a withdrawal from super
Once you have satisfied a condition of release you may make a withdrawal from super, however there may be tax payable on this withdrawal as set out in the below table.
Age | Limit | Max tax rate (%) |
Taxable component – taxed element | ||
60 and over | Non-assessable non-exempt income | 0% |
Preservation age to 59 | First $230,000 (low-rate cap) | 0% |
Balance over $230,000 | 15% | |
Below preservation age | Whole component | 20% |
Taxable component – untaxed element | ||
60 and over | First $1.650 million (untaxed plan cap) | 15% |
Balance over $1.650 million | 45% | |
Preservation age to 59 | First $230,000 (low-rate cap) | 15% |
Over $230,000 and under $1.650 million | 30% | |
Balance over $1.650 million | 45% | |
Below preservation age | First $1.650 million (untaxed plan cap) | 30% |
Balance over $1.650 million | 45% | |
Tax-free component | ||
Any age | All | 0% |
Please note: You may also have to pay the Medicare levy and surcharge in addition to the tax rate shown above.
Superannuation death benefits
Superannuation does not automatically form part of your Estate as other assets may. The trustee of the fund has ultimate discretion on the payment of benefits on the death of a member. You may notify the trustee of your intentions via a ‘beneficiary nomination’ but it must be a valid nomination with the recipient as your Estate or a financial dependent as defined by law.
There are different options available in the type of nomination you make that will influence the Trustee:
- Non-binding nomination – provides a guide to the trustee for payments.
- Binding nomination – binds the trustee to the nomination made if it is valid. Must be renewed every three years.
- Non-lapsing, binding nomination – as for binding without the renewal requirement.
Taxation of lump sum death benefits
The taxation of the death benefit payment will depend on the ultimate beneficiary of the payment as shown in the table below.
Recipient | Tax-free component | Taxable component (taxed element) | Taxable component (untaxed element) |
Dependant | 0% | 0% | 0% |
Non-dependent | 0% | 15% | 30% |
Super Choice
Most employers allow employees to choose a superannuation fund for Superannuation Guarantee (SG) contributions to be paid into. You should check with your employer whether you are eligible.
If you are given a choice and don't choose a fund, your employer will pay your contributions into a default superannuation fund that they have chosen.
Are You Eligible for Choice?
Employees who are employed under the following awards are generally entitled to superannuation choice:
- A federal award
- A former state award (notional agreement preserving state award)
- An award or agreement that does not require superannuation support
- No award or agreement
Certain federal and state public sector employees and members of certain defined benefit funds may not be eligible to choose their own fund. Choice also may not apply if the award determines the superannuation fund.
Which Contributions Does Superannuation Choice Apply to?
Superannuation choice applies specifically to SG contributions. Your employer can also pay other superannuation contributions to the chosen fund, however this is not a legal requirement. Other contributions include:
- Personal after-tax contributions
- Salary sacrifice contributions
- Voluntary employer contributions
If your employer decides not to pay these additional contributions to your chosen fund, the contributions will be made to the default fund chosen by your employer.
If you have a salary sacrifice arrangement with your employer, you should specify in the agreement which fund contributions should be paid into.
How to Make a Choice
Superannuation choice may be initiated by yourself or your employer. In either case you need to complete a Standard choice form and give it to your employer. This form is available on the Tax Office (ATO) website or from your employer.
When you start a new job, your employer has 28 days to give you a standard choice form. If you are an existing employee, you can ask your employer for a form at any time and they have 28 days to give you one, unless you have already made a nomination within the previous 12 months.
You are able to change the superannuation fund you have nominated but you can only make one choice in a 12-month period (unless your employer agrees).
Your employer selected fund often provides a minimum level of insurance cover. If you elect your own superannuation fund you will not have access to this insurance cover. It is important to ensure you have appropriate life insurance based on your circumstances before deciding not to be a member of the employer nominated fund.
Important information regarding this information
This information is of a general nature. It does not consider your personal objectives, needs or situation. It does not represent legal, tax or personal advice and should not be taken as such. If it has been provided to you with a Statement of Advice (SoA), you should rely on the personal advice in the SoA.
Care has been taken to provide up to date and accurate information relating to the subject area however BR Advice Pty Ltd (ABN 30 612 056 523, AFSL 488655), Blue Rock Private Wealth Pty Ltd (ABN 95 166 927 055, AFSL 452733), Blue Rock Private Wealth (Melb) Pty Ltd (ABN 48 652 202 698, ASIC AFS No. 1298365) and their representatives make no representation as to its accuracy or completeness.
Published: September 2022.
© Copyright 2022.
