How much tax do I have to pay on superannuation contributions?

Australian workers are expected to make regular contributions to their super throughout their working life to help fund their retirement. For many, the process is taken care of by employers through the super guarantee (SG).

In addition to SG contributions, Australians also have the option to make voluntary contributions to their super fund. If you’re considering doing so, you may be wondering how you’ll be taxed on these additional savings.

The way in which your super contributions are taxed will generally depend on whether tax has already been taken out of them. For example, if you choose to put money into super after income tax has already been taken out, it is considered an “after tax” or “non-concessional” contribution, meaning no additional tax will be owed.

On the other hand, if the money comes straight out of your salary before tax is taken out, it’s considered a “pre-tax” or “concessional” contribution. Concessional contributions often attract a lower tax rate than income tax at 15 per cent.

How are pre-tax superannuation contributions taxed?

For most earners, concessional – or pre-tax – super contributions are taxed at 15 per cent. Concessional contributions can include:

1. Contributions made by your employers like SG contributions and those made through a salary sacrificing arrangement
2. Contributions you make which you may plan to claim a tax deduction on

It’s important to keep in mind that concessional contributions are capped at $27,500 per financial year. This increased in the 2021-22 financial year from $25,000 the year prior.

Concessional contribution caps reset each year on June 30, which is the last day of the financial year. If the contributions received in your super fund by June 30 exceed the upper limit of $27,500, the excess amount will be taxed at the same marginal rate as your income.

If you are required to pay additional tax because your concessional contributions are over the specified limit, you may be able to withdraw part of the excess contributions to help cover the extra tax liability.

High-income earners may have to pay an additional 15 per cent under Division 293 if their wages and super contributions add up to over $250,000. Consider checking if you need to pay this Division 293 tax as well.

How are post-tax superannuation contributions taxed? 

There are a few contributions that fall into the “after tax” category, such as contributing to super without claiming a tax deduction (if you have exceeded your concessional contribution limit) or having a spouse contribute to your fund. These are considered non-concessional earnings as your income has already been taxed at the marginal rate.

Non-concessional contributions are capped at $100,000 per financial year for those with super balances of less than $1.6 million. If your super balance is in excess of $1.6 million, you are ineligible to make non-concessional contributions.

It’s worth noting that if you fail to check your available non-concessional contribution limit and stay beneath it, you could face having the excess taxed by up to 94 per cent.

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