How super is taxed
Super may be taxed at 3 points in its life cycle:
- on contributions
- on the investment earnings in the fund, which in the
- accumulation phase are taxed at 15%
- retirement phase are tax-free – subject to a lifetime limit on the amount you can transfer into retirement phase (your transfer balance cap)
- on withdrawal, as explained in this page.
How tax applies to your super withdrawals
To withdraw money from super you need to have satisfied a condition of release. Except where indicated, the tax treatment explained here assumes you have satisfied a condition of release.
To work out how your super withdrawal will be taxed you need to know:
- whether the money in your super account is tax-free or taxable – your super benefits generally include both
- your preservation age and your age when you get the payment
- whether you get the payment as a lump sum or income stream (and the type of income stream)
- whether you're receiving a death benefit income stream
- whether you exceed the following caps
These factors determine whether you:
- pay tax on the withdrawal
- get tax offsets that reduce the amount of tax you pay.
To find the tax rates for your super payment, choose the scenario that applies to you at the time you expect to withdraw the super:
- if your age is less than your preservation age
- if you're between your preservation age and 60 years old
- if you're 60 years or older or receiving a capped defined benefit income stream
- if you're receiving a capped defined benefit income stream that is a death benefit.
Tax-free and taxable super
To understand how your super payment is taxed, you need to know whether the money in your super account when withdrawn is either:
- tax-free – the 'tax-free component' of your super
- taxable – the 'taxable component' of your super, consisting of either or both:
- a taxed element
- an untaxed element, depending on whether the benefit is paid from a taxed or untaxed source. A super benefit containing an untaxed element is most commonly in a public sector fund.
Your super fund can tell you how much of the money in your super account is tax-free or taxable.
Why some super is tax-free and some taxable
Whether the money in your super account is tax-free or taxable when you withdraw it generally depends on the type of contributions made and whether tax was paid on it:
- Tax-free withdrawals are generally from your non-concessional (after-tax) contributions, including personal contributions you made from your after-tax income, unless you were allowed a tax deduction for them.
- Taxable withdrawals are generally from your concessional (before-tax) contributions – those made from income before you paid tax on it, including:
- the super contributions your employer must make for you
- money you salary sacrifice into super
- super contributions you were allowed to claim a tax deduction for.
The amount of tax you pay when you withdraw taxable super depends on your age and whether your fund paid tax on it:
- contributions and related investment earnings on which your fund has paid tax (at the rate of 15%) forms the 'taxed element' of your taxable super
- any amount included in your taxable super that your fund has not paid tax on forms the ‘untaxed element’ of your taxable super.
Generally, your super benefit will include both a tax-free and a taxable component. When you make a withdrawal, your fund calculates the components of the withdrawal based on the proportion of components that make up the total value of your super account.
The amount of each component is calculated at the following times:
- each lump sum payment – just before it is paid
- income stream – when the income stream starts
- income stream commuted to a lump sum – the components are calculated when the income stream started. (However, if the income stream is a deferred super income stream, the components are calculated just before the commutation occurred)
- an income stream commuted back into your super – before a new benefit is paid.
For more information, see Calculating components of a super benefit.
You can't choose to withdraw only from the tax-free component of your super account unless the total amount of your account is tax-free.
You're under your preservation age
This section applies to you if both:
- you're currently under your preservation age
- you were not in receipt of a death benefit (reversionary) capped defined benefit income stream where the deceased was 60 years old or older at the time of death.
To work out how your super payment will be taxed you need to know how much of the money in your super account is a:
- tax-free component
- taxable component the super fund paid tax on (taxed element)
- taxable component the super fund has not paid tax on (untaxed element).
Tax on withdrawals of tax-free component
You don’t pay tax on the tax-free component of your super where you:
- withdraw it as a lump sum
- receive an account-based income stream.
Tax may be payable on the tax-free component of your super income stream where:
- you're in receipt of a death benefit capped defined benefit income stream where the deceased was 60 years old or older at the time of death
- you exceed your defined benefit income cap.
The exception is where you have illegally accessed your super before you met a condition of release. In these circumstances, the entire amount of your super benefit is taxable regardless of whether it has a tax-free component.
Tax on withdrawals of taxable component
The taxable component of your payment is taxed as shown in this table.
Type of super |
Type of withdrawal |
Effective tax rate (including Medicare levy) |
|---|---|---|
Taxable component – taxed element |
Income stream |
Your marginal tax rate – however, if you receive the income stream as a disability super benefit, you are entitled to a tax offset of 15% on the taxed element |
Taxable component – taxed element |
Lump sum |
Your marginal tax rate or 22%, whichever is lower |
Taxable component – untaxed element |
Income stream |
Your marginal tax rate |
Taxable component – untaxed element |
Lump sum |
Your marginal tax rate or 32%, whichever is lower – unless the sum of the untaxed elements of all super lump sum benefits received under the super plan exceeds the untaxed plan cap. Amounts above the cap will be taxed at the top marginal rate. The untaxed plan cap applies separately to each super provider you receive super lump sums from. |
Other tax rates may apply in some special circumstances.
Filling out your tax return
When you withdraw money from super, your super fund will send you a payment summary showing:
- how much of the super you received is taxable and how much is tax-free
- how much tax they withheld from the payment to pay on your behalf
- any tax offset applicable to the taxed element you receive.
When you fill out your tax return you must include the taxable component of your super payment as assessable income.
Only claim tax offsets for super income streams in the offset section of your tax return – tax offsets for super lump sums are calculated by us.
Example: lump sum
Suzi is 50 years old and applies to withdraw some super on compassionate grounds.
Suzi receives a lump sum super benefit of $11,000. Her fund tells her this consists of a $1,000 tax-free component and $10,000 taxable component. The entire taxable super was taxed in the fund.
When Suzi completes her tax return, she includes the $10,000 taxable component as income. This results in her paying the following effective tax rates.
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Tax-free component: $1,000 |
No tax |
Taxable component – taxed element: $10,000 |
Her marginal tax rate or 22%, whichever is lower |
End of example
Example: multiple lump sum payments in a year
Frankie is 45 years old, and a military veteran who receives several invalidity super lump sums each year. He is not eligible to have his super lump sums treated as disability super benefits and has not exceeded the untaxed plan cap.
The total of the multiple lump sums he received during the year is $70,000. At the end of the year his fund gives him a single payment summary showing that $5,000 was the tax free component, $45,000 was the taxable component – taxed element and $20,000 was the taxable component – untaxed element.
This results in him paying the following effective tax rates:
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Tax-free component: $5,000 |
No tax |
Taxable component – taxed element: $45,000 |
His marginal tax rate or 22%, whichever is lower |
Taxable component - untaxed element: $20,000 |
His marginal tax rate or 32%, whichever is lower as he is under the untaxed plan cap. |
End of example
Example: income stream
George is 53 years old and receives a non-commutable life pension of $18,000 from his super fund. The payments of George's life pension are super income stream benefits.
His fund tells him the entire amount is a taxable component that was taxed in the fund.
When George completes his tax return, he includes the $18,000 taxable component as income. He is not eligible to claim the disability super benefit tax offset, so he pays the following effective rate of tax.
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Taxable component – taxed element: $18,000 |
His marginal tax rate |
End of example
You're between your preservation age and 60 years old
To work out how your super payment will be taxed, you need to know how much of the money paid to you was attributable to the following components:
- tax-free component
- taxable component the super provider has paid tax on (taxed element)
- taxable component the super provider has not paid tax on (untaxed element).
Tax on withdrawals of tax-free component
You don’t pay tax on the tax-free component of your super where you:
- withdraw it as a lump sum
- receive an account-based income stream
- receive a capped defined benefit income stream (that was not a death benefit income stream where the deceased was 60 years old or older at the time of death) and you were between your preservation age and less than 60 years old.
The exception is where you have illegally accessed your super before you met a condition of release. In these circumstances, the entire amount of your super benefit is taxable regardless of whether it has a tax-free component.
Tax on withdrawals of taxable component
The taxable component of your payment is taxed as shown in this table.
Type of super |
Type of withdrawal |
Effective tax rate (including Medicare levy), up to the low rate cap |
Effective tax rate (including Medicare levy), above the low rate cap |
|---|---|---|---|
Taxable component – taxed element |
Income stream |
Your marginal tax rate less 15% tax offset |
Your marginal tax rate less 15% tax offset |
Taxable component – taxed element |
Lump sum |
0% |
Your marginal tax rate or 17%, whichever is lower |
Taxable component – untaxed element |
Income stream |
Your marginal tax rate |
Your marginal tax rate |
Taxable component – untaxed element |
Lump sum |
Your marginal tax rate or 17%, whichever is lower |
Your marginal tax rate or 32%, whichever is lower – unless the sum of the untaxed elements of all super lump sum benefits received under the super plan exceeds the untaxed plan cap. Amounts above the cap will be taxed at the top marginal rate. The untaxed plan cap applies separately to each super provider you receive super lump sums from |
Filling out your tax return
Your fund will send you a payment summary showing:
- how much of the super you received is taxable and how much is tax-free
- how much tax they withheld from the payment to pay on your behalf
- any tax offset applicable to the taxed element you receive.
If you receive a super death benefit capped defined benefit income stream, you will need to use the Defined benefit income cap tool to work out what you need to include in your income tax return.
You must include the taxable component of your super payment as assessable income on your tax return.
In the offset section of your tax return, claim only tax offsets for super income streams. Tax offsets for super lump sums are calculated by us.
If you're between your preservation age and 60 years old and receive a lump sum super benefit that includes a taxable component, it is assessable income you must include in your tax return. This is the case even if the amount you receive is below the low rate cap amount and no tax has been withheld by your fund.
Example: lump sum
Tony is 58 years old and is retired. He receives his first lump sum super payment of $350,000 on 25 July 2021. His fund tells him this amount consists of a $100,000 tax-free component and a $250,000 taxable component. All the taxable component was taxed in the fund.
Tony includes the $250,000 taxable component as income on his 2021–22 tax return. This results in him paying the following effective rates of tax:
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Tax-free component: $100,000 |
No tax |
Taxable component – taxed element (up to the low rate cap): $225,000 |
0% |
Taxable component – taxed element (over the low rate cap): $25,000 |
17% |
End of example
Example: multiple lump sum payments in a year
Peta is 59 and a military veteran who receives several invalidity super lump sums each year.
She is not eligible to have her super lump sums treated as disability super benefits. She has exceeded both the low rate cap and untaxed plan cap from past year super lump sum payments. The total of these super lump sums during the 2020–21 year is $105,000.
At the end of the year, her fund gives her a single super lump sum payment summary showing that $20,000 was the tax-free component, $40,000 was the taxable component – taxed element and $45,000 was the taxable component – untaxed element.
This results in her paying the following effective tax rates:
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Tax-free component: $20,000 |
No tax |
Taxable component – taxed element: $40,000 |
Her marginal tax rate or 17%, whichever is lower |
Taxable component – untaxed element: $45,000 |
The top marginal tax rate |
End of example
Example: transition to retirement income stream
Jenny is 58 years old and has begun a transition to retirement income stream. In addition to her income from employment ($40,000 a year), she gets a transition to retirement income stream from her super as an annual payment.
On 29 August 2021, she receives $28,000. Her fund tells her it is all a taxable component that was taxed in the fund. It also tells her she is able to claim a 15% tax offset.
Jenny includes the $28,000 as income on her tax return. She claims a tax offset that results in her paying the following effective rate of tax on the income stream:
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Taxable component – taxed element: $28,000 |
Her marginal tax rate less 15% tax offset |
End of example
Low rate cap amount
The low rate cap amount applies if you reach your preservation age but are under 60 years old.
The low rate cap is a limit on the amount of taxable components (taxed and untaxed element) that can be taxed at a concessional (lower) rate of tax.
It's a lifetime cap, which is reduced by any taxable component you receive from any payer after you reach your preservation age (it cannot be reduced below zero).
Once you reach the low rate cap, any further money you withdraw as a lump sum is taxed at a different rate.
The low rate cap is $230,000 in 2022–23. For previous years, see Low rate cap amount.
If you're between your preservation age and 60 years old and receive a lump sum super benefit that includes a taxable component, you must include it in your tax return. This is the case even if the amount you receive is below the low rate cap amount and zero tax has been withheld by the super fund.
Example: low rate cap
In 2018–19, Talise was 58 and received super lump sum payments with taxable components totalling $150,000.
In 2019–20 the low rate cap was $210,000. For Talise, this is reduced by the taxable components she had previously received ($150,000) to $60,000. Talise also receives super lump sum payments with taxable components totalling $90,000. Of this, $30,000 will be in excess of the low rate cap and will be taxed at:
- the lower of her marginal tax rate or 17% on any taxed element
- the lower of her marginal tax rate or 32% on any untaxed element.
You're 60 years old or older, or receiving a death benefit (reversionary) capped defined benefit income stream
This section applies if you're:
- 60 years old or older and have a capped defined benefit income stream
- less than 60 years old and receiving a death benefit (reversionary) capped defined benefit income stream where the deceased was 60 years old or older at the time of death
- 60 years old or older and receiving a super income stream that is not a capped defined benefit income stream and you have an untaxed element
- 60 years old or older and receiving a super lump sum and you have an untaxed element.
Where you are receiving an account-based pension, you don't pay tax on the taxed element or tax-free component after you turn 60 years old.
To work out how your super payment is taxed you need to know:
- your defined benefit income cap (if applicable)
- whether the income stream is a death benefit (reversionary) income stream
- the amount of the
- tax-free component
- taxable component that the super fund has paid tax on (taxed element)
- taxable component that the super fund has not paid tax on (untaxed element).
Tax on withdrawals of tax-free component
You don’t pay tax on the tax-free component of your super where you withdraw it as a lump sum.
You may be required to include the tax-free component in your assessable income where you're receiving a capped defined benefit income stream and both of the following apply:
- you're receiving a death benefit income stream where the deceased was aged 60 years or older at the time of death
- the combined total of your tax-free component and taxed element (taxed source) is in excess of your defined benefit income cap.
The exception is where you have illegally accessed your super before you met a condition of release. In these circumstances, the entire amount of your super benefit is taxable regardless of whether it has a tax-free component.
Type of withdrawal |
Type of component |
Effective tax rate (including Medicare levy) |
|---|---|---|
Income stream |
Taxable component – taxed element |
No tax |
Income stream |
Tax-free component |
No tax |
Lump sum |
Taxable component – taxed element |
No tax |
Income stream |
Taxable component – untaxed element |
Your marginal tax rate |
Lump sum |
Taxable component – untaxed element |
Your marginal tax rate or 17%, whichever is lower – unless the sum of the untaxed element of all super lump sum benefits received under the super plan exceeds the untaxed plan cap. Amounts above the cap are taxed at the top marginal rate. The untaxed plan cap applies separately to each super fund you receive super lump sums from |
Type of withdrawal |
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|---|
Income stream |
Tax-free component and or taxable component – taxed element is above the defined benefit income cap |
50% of the amount above the cap is assessed at your marginal tax rates. This is known as 'assessable amount from your capped defined benefit income stream' |
Income stream |
Tax-free component and or taxable component – taxed element is below the defined benefit income cap |
No tax |
Income stream |
Taxable component – untaxed element |
Your marginal tax rate |
Filling out your tax return
Your fund will send you a payment summary showing:
- how much of the super you received is taxable and how much is tax-free
- how much tax they withheld from the payment to pay on your behalf
- the tax offset amount, which should be blank as you will need to determine how much offset you're entitled to
- whether you're receiving a capped defined benefit income stream where the deceased was older than 60 years old at the time of death.
If you're receiving a super lump sum payment, you don't include in your tax return the tax-free component or the taxed element of the taxable component of your super lump sum payment.
Tax offsets for super lump sums are calculated by us.
Example: lump sum
Mei is 60 years old and receives a lump sum of $380,000 from her super on 25 September 2021.
The payment consists of a $45,000 tax-free component and a $335,000 taxable component. The taxable component includes $130,000 that was taxed in the fund and $205,000 that the fund has not paid tax on.
Mei includes the $205,000 as income on her tax return and pays the following effective rates of tax:
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Tax-free component: $45,000 |
No tax |
Taxable component – taxed element: $130,000 |
No tax |
Taxable component – untaxed element: $205,000 |
Her marginal tax rate or 17%, whichever is lower (the untaxed element of the lump sum is less than the untaxed plan cap for 2021–22 of $1.615 million) |
End of example
Example: multiple lump sum payments in a year
Howard is 72, and a military veteran who receives several invalidity super lump sums each year. He is not eligible to have his super lump sums treated as disability super benefits. He has exceeded the untaxed plan cap. The total of these super lump sums during the year is $105,000.
At the end of the year, his fund gives him a single super lump sum payment summary showing that $20,000 was the tax-free component, $40,000 was the taxable component – taxed element and $45,000 was the taxable component – untaxed element.
This results in him paying the following effective tax rates:
Type of super |
Effective tax rate (including Medicare levy) |
|---|---|
Tax-free component: $20,000 |
No tax |
Taxable component – taxed element: $40,000 |
No tax |
Taxable component – untaxed element: $45,000 |
The top marginal tax rate |
End of example
If you're receiving a capped defined benefit income stream, you must include in your tax return the:
- untaxed element of the taxable component of your super payment as assessable income
- assessable amount from your capped defined benefit income stream – you may need to use the Defined benefit income cap tool.
Find out more on how to fill in your tax return at 7 Australian annuities and super income streams.
In the offset section of your tax return, claim only tax offsets for super income streams. Find out more about how to work out your tax offset at T2 Australian super income stream.
Example: capped defined benefit income stream
John is 62 years old and received a capped defined benefit income stream of $117,000 in 2020–21.
The payment was for the full year and made up of a $67,000 tax-free component and a $50,000 taxable component – taxed element.
John includes the following in his tax return:
Type of super:
- Tax-free component + taxed element = $117,000
- Defined benefit income cap $100,000
- $117,000 − 100,000 = 17,000
- Assessable amount from a capped defined benefit income stream is $17,000 ÷ 2 (50% of the amount over the cap)
- John includes $8,500 at 7M on his tax return.
John pays tax on the $8,500 (50% of the amount above the cap) at his marginal tax rate.
End of exampleUntaxed plan cap amount
The untaxed plan cap amount is the maximum amount of the untaxed elements taxed at concessional rates. Amounts above the untaxed plan cap are taxed at the top marginal rate.
The untaxed plan cap is a per plan limit that applies separately to each super fund you receive a super lump sum from. It is reduced by the total amount of each untaxed element in the fund that you have received from that fund.
The untaxed plan cap is $1.650 million in 2022-23. For prior years, see Untaxed plan cap amount. The top marginal rate is 47% (including Medicare levy).
Example: untaxed plan cap
Anh started receiving lump sums from her super in 2018–19, when the untaxed plan cap was $1.480 million and Anh received $80,000 in untaxed element payments from this fund.
In 2019–20 the untaxed plan cap for the super lump sums she receives from this fund is $1.515 million. For Anh, this is reduced by the untaxed element payments she had previously received ($80,000) to $1.435 million. Anh also received another $85,000 in untaxed element super lump sum payments from this fund.
In 2020–21 the untaxed plan cap is $1.565 million, but this is reduced by the total of untaxed payments she had previously received ($165,000) to $1.4 million. Anh also received another $90,000 in untaxed element super lump sum payments from this fund, which will further reduce her untaxed plan cap amount for any untaxed element payments she receives from this fund in the 2021–22 year.
End of exampleTax on super death benefits
The tax on a super death benefit depends on whether:
- you were a dependant of the deceased
- it's paid as a lump sum or a super income stream benefit
- the income stream is an account-based income stream or a capped defined benefit income stream
- the super is taxable or tax-free, and whether the super fund has already paid tax on the taxable component
- your age and the age of the deceased person when they died.
If you are a dependant of the deceased, you don't need to pay tax on the taxable component of a death benefit if you receive it as a lump sum. If you receive the benefit as an income stream, different rates of tax may apply depending on the factors mentioned above.
If you're not a dependant of the deceased, you can only receive the benefit as a lump sum.
The taxable component of the payment will be entitled to a tax offset that ensures the rate of income tax is as follows:
- taxed element – maximum of 15% plus Medicare levy
- untaxed element – maximum of 30% plus Medicare levy.
Tax on military invalidity benefits
Due to the court decision in Commissioner of Taxation v Douglas [2020] FCAFC 220, the tax and superannuation treatment of some invalidity benefit payments has changed (see Military invalidity pensions – Douglas decision).
Work out the tax that applies to withdrawals or payments from super.