Superannuation is an attractive investment option due to the special tax concessions that are not available to other types of investments. Tax on earnings for investments within superannuation is levied at a maximum rate of 15%. Also, where assets are held for more than 12 months and sold within the superannuation environment, CGT is levied at 10% as opposed to a maximum rate of 24.5% that can apply if held in your own name.
Your investment into superannuation funds allows you to take advantage of the extremely generous tax treatment of this type of investment. Superannuation maximises the growth and tax benefits of your investment dollar and are among the most attractive investment vehicles currently available.
Anyone under the age of 65 can contribute to super at any time (or receive contributions on their behalf) regardless of their work status.
Upon reaching age 65 and before turning 75, you can only contribute to the superannuation environment where you have been gainfully employed during the financial year for at least 40 hours over a consecutive 30 day period. Having satisfied this condition, you can then contribute for the remainder of the financial year (ending on 30 June). You may also receive mandated employer contributions (this includes superannuation guarantee or contributions required to be made under an agreement or award certified by an industrial authority).
After age 75, you are still able to have mandated employer contributions made on their behalf (as required by an agreement or award certified by an industrial authority).
As the focus of superannuation is to assist you saving for your retirement, the Government restricts when you can access these savings. Amounts contributed to superannuation are “preserved” until you meet a condition of release (such as retirement). A condition of release is merely a trigger under the legislation allowing you to withdraw your superannuation either as a series of pension payments or lump sum.
The most common condition of release is retirement. Retirement must occur after your preservation age which depends on when you were born which is summarised in the following table:
Date of Birth
Up to 30 June 1960
1 July 1960 - 30 June 1961
1 July 1961 - 30 June 1962
1 July 1962 - 30 June 1963
1 July 1963 - 30 June 1964
1 July 1964 and thereafter
Additional information on the conditions of release is available on the Australian Taxation Office website (www.ato.gov.au).
Once you have met a condition of release you are eligible to access your superannuation either as lump sum payments at any time or use your superannuation to commence a superannuation income stream. The income stream allows your superannuation to be paid to you on a regular basis that you nominate (such as fortnight, monthly or annually).
There is a minimum prescribed pension amount for all new pension payments established after 01 July 2007. There is no maximum amount other than the balance of your super account. Unless you have commenced a transition to retirement pension, in which case a maximum pension amount is set at 10% of your account balance.
The minimum annual pension payments for account based pensions are:
Minimum annual payment as a % of account balance
Your superannuation balance is made up of a tax free and taxable component. All withdrawals from your account are paid proportionally based on these two components.
The amount of tax that is applied to the taxable component of lump sum payment is based on your age.
Below Preservation Age
Preservation Age to 59
Age 60 and over
Tax free component
No tax up to $180,000, 16.5% on the remaining balance
Pension income is totally tax free for people aged 60 years and over.
For people who have met a condition of release and under 60 years of age, the taxable component of pension income is taxed at your marginal tax rate plus the Medicare levy. People aged 55-59 are eligible for a further tax concession in the form of a 15% tax offset on the taxable component of the pension payment.
The Government imposes limits on the amount that can be contributed to superannuation and receive concessional treatment. Amounts contributed above the contribution caps can incur significant tax penalties.
The rules relating to contribution caps can be complex. The information is below is merely a summary and you should seek advice prior to making a contribution to ensure you do you exceed the relevant contribution cap.
Information on the penalties incurred by breach the contribution caps is available on the Australian Taxation Office website (www.ato.gov.au).
A limit has been placed on tax deductible contributions known as Concessional Contributions (CC’s). This is $30,000 p.a. (2015/16) and is indexed in line with average weekly ordinary time earnings (AWOTE), in increments of $5,000 (rounded down). Contributions tax (paid within the superannuation fund) applies to these contributions and are taxed at 15%.
A higher concessional contributions cap of $35,000 p.a. applies to older Australians if you are aged 49 or over on 30 June 2015 (for 2015/16):
The CC cap applies per person and you are no longer be able to take advantage of multiple employment relationships to access more than one CC limit.
• Superannuation Guarantee (SG) and other employer contributions.
• Salary sacrifice.
• Self-employed contributions or contributions made as a substantially self employed or unsupported person (for which a tax deduction is claimed).
Non-Concessional contributions (NCC’s) are those made by an individual from after-tax income or current savings (and where a tax deduction is not claimed). An annual NCC cap of $180,000 applies (2015/16). However, a ‘3 year’ NCC cap allows you to bring forward two years of future contribution entitlements, giving you a cap of $540,000 over three financial years provided you are under age 65.
The Superannuation Guarantee provides the minimum level of support that employers must provide. The minimum SG is 9.5% p.a. (2015/16) and this will gradually increase to 12% p.a. by 1 July 2025.
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