Taxation of Australian Superannuation

All contributions to a superannuation fund by an employer, or indeed by an individual out of before tax dollars (also known as “salary sacrifice”) attract a Government tax of 15%. This remains the case despite the wide ranging changes to the superannuation system announced by the Government in the 2006 Federal Budget - as does the tax (at concessional levels) on investment earnings within a superannuation fund.

Australians aged 60 and over who have already paid tax on their superannuation contributions and earnings will not pay tax on their superannuation benefits from 1 July 2007. The removal of the benefits tax sweeps away the complexities retirees face when taking their benefits. As superannuation benefits are no longer assessable income, there is an incentive to continue to work while drawing down on superannuation as less tax is paid on on work income.

Reasonable benefit limits (RBLs) have been abolished and individuals now have much greater flexibility than previously in terms of how and when they wish to draw on their superannuation in retirement. The ability to make deductible superannuation contributions has also been extended to age 75, subject to a being able to meet a "work test" from age 65.. The self-employed are able to claim a full deduction for their superannuation contributions as well as being eligible for the Government co-contribution for their personal post-tax contributions.

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