The amount of tax an individual pays on their super contributions depends on whether the contributions were made before or after they paid income tax; they have exceeded the super contributions cap or they are a very high-income earner.
Before-tax super contributions
Concessional (before-tax) super contributions are taxed at 15 per cent. They include employer contributions; contributions that are allowed as an income tax deduction and notional taxed contributions if you are a member of a defined benefit fund.
After-tax super contributions
Non-concessional (after-tax) super contributions are not subject to tax. They include contributions you or your employer make from your after-tax income; contributions your spouse makes to your super fund and personal contributions that are not claimed as an income tax deduction.
Excess contributions tax
There are limits on the amount of concessional and non-concessional contributions an individual can make each year, and these vary depending on the person’s age.
Those who contribute too much to their super may have to pay extra tax. If they exceed the concessional super contributions cap, the excess is included in their income tax return and taxed at their marginal tax rate. Individuals can choose to withdraw some of the excess contributions to pay the additional tax.
Those who exceed the non-concessional super contributions cap can choose to withdraw the excess contributions and any earnings. The earnings are then included in their income tax assessment and taxed at your marginal rate.
When individuals do not withdraw the earnings, the excess is taxed at 47 per cent.
Division 293 tax for very high-income earners
Division 293 tax is an additional tax on super contributions if a person’s combined income and super contributions are more than $300,000 a year. Division 293 tax is 15 per cent of a person’s taxable concessional contributions above the $300,000 threshold.
For those who are a member of a defined benefit fund, Division 293 tax may be calculated on notional contributions which are not capped.