Tax and Structures

Superannuation taxation

Tax rates in accumulation and pension phase

The tax rules differ for the two phases of super:

1. The accumulation phase, and

2. The pension (drawdown) phase.

The first phase is the accumulation phase, when money is contributed to superannuation, usually during your working years.

The pension phase begins when you start to draw down an income from your superannuation, typically in retirement, in the form of a pension.

The tax rate on earnings within a super fund in the accumulation phase is a maximum 15%. For the pension (drawdown) phase the tax rate is 0% on all income and any capital gains.

Note that members are not permitted to have a super pension balance exceeding their personal Transfer Balance Cap threshold. Amounts in excess of the transfer balance cap must either be reverted back to accumulation phase in a super account and be subject to 15% tax on the earnings, or be withdrawn completely from the superannuation environment. (Please note: The Transfer Balance Cap is currently set at $1.9 million for the 2023/24 financial year).

Note that the earnings from assets supporting new and existing transition to retirement pensions (accumulation phase) are no longer subject to an earnings tax exemption. Earnings generated are now taxed up to 15%, the same as if the monies were still in accumulation stage.  This taxation applies until a condition of release is met, such as reaching age 65, at which point, if retained, the pension reverts to a transition to retirement pension (in pension phase). Transition to Retirement (TTR) accounts are discussed further in the Superannuation module.