Highlighted results for search term

Superannuation and Tax

Great news! Superannuation is generally taxed at a lower rate than your other income. This makes your super a tax effective way of saving for your retirement with more of your hard earned money going towards your future.

Your superannuation is treated differently to most other savings. There are special tax treatments and concessions that apply to superannuation contributions to help Australians save for their retirement.

When is Your Super Taxed?

The superannuation tax can be confusing but in short, your superannuation benefit can be taxed at three stages.

When making super contributions


Any employer contributions (SGs) and Salary Sacrifice contributions you make are generally taxed at a lower rate than your normal income. These are called ‘concessional contributions’ and, for the 2016/2017 financial year, are taxed at a rate of 15% for contributions up to $30,000 per person or $35,000 if you were aged 49 or older on 30 June 2016.

Low Income Super Contribution

For the 2016/2017 financial year if you earn $37,000 or less a year, and you, or your employer make concessional (before-tax) superannuation contributions on your behalf, then you can expect a refund (up to $500) of the contributions tax deducted from your super account, paid directly to your superannuation account by the federal government. This tax-refund to your super account is known as the Low Income Super Contribution.

Excess contributions tax

If you make super contributions that exceed your concessional contributions cap, these contributions are included in your taxable income, taxed at your marginal tax rate plus an excess concessional contributions charge. You will also pay extra tax on your concessional contributions if your income for surcharge purposes, including concessional contributions, is over $300,000 in the 2016/2017 financial year. Also, if you make non-concessional (after-tax) contributions, and you exceed the non-concessional cap (or, if under the age of 65, the 3-year bring-forward cap) then you will also have to deal with the excess contributions rules.


When a super fund earns income


During the ‘accumulation’ phase, you have an earnings tax of 15% for your super. The accumulation phase is the time you have a super account, when you’re not taking a pension. Typically, you have your account in accumulation phase while you’re working. No tax is payable on earnings from assets financing an income stream (pension); that is, no tax is payable on a super account’s earnings when a super account is in pension phase.


When receiving super benefits


Tax on your super benefits will depend on several factors including –

  • Your preservation age
  • Whether the money in your super is taxable or tax-free
  • Whether you receive the payment as an income stream or lump sum.

Note: If you die, and your super benefits are left to an individual that is not a ‘dependant’ under the tax laws, then they will have to pay tax on the taxable component of the death benefit.


Tax Benefits and Super

Tax – love it or hate it – is a vital part of our country’s economy, so it’s important to pay our dues when they are due. However, you might be able to access some concessions that could reduce your tax bill and build your superannuation for retirement. Find out how to reduce your tax and save for your retirement.

Salary sacrifice


Salary sacrificing is the act of re-directing part of your salary, before tax is deducted, into your super fund. When you salary sacrifice superannuation, you only pay 15% tax on those inputs, up to your concessional contribution cap (see below).

So, if your individual income tax rate is higher than 15%, adding your money to super via salary sacrifice has potential tax benefits.

To illustrate, the Australian Securities and Investments Commission (ASIC) gave an example of how someone could boost their super balance by redirecting a proportion of their pay into salary sacrifice super contributions and make tax savings in the process. Let’s take Jane who earns $90,000, before tax, and decides to redirect $10,000 of her pay into superannuation:

  Without Super contributions With a $10,000 salary sacrifice into Super
Taxable income $90,000 $80,000
Take home pay $66,953 $60,853
Total tax $23,047 $19,147
Salary sacrifice contribution in Super (taxed at 15%) $0 $8,500

As you can see, while Jane’s take-home pay is reduced by $6,100, her super balance grows by $8,500 providing a net gain of $2,400.

In addition, the higher your tax bracket, the larger the potential gain as salary sacrifice contributions are capped at 15% tax rate for individuals with income (including before-tax super contributions) up to $300,000 per year.

Limits do apply to the amount of salary sacrifice super contributions, which brings us to the Concessional Contributions Cap.


Concessional and Non Concessional Contributions


To ensure the superannuation tax arrangements support the purpose of superannuation and are financially sustainable, the Government continues to look at the current tax benefits for all Australians. This includes Concessional and Non Concessional contributions caps put in place.

Concessional Contributions Cap

When aiming to reduce your tax through super, you need to know the limits of your tax concessions. A concessional contribution cap is one such limit. To keep it simple: A concessional contribution to your super is a contribution made from your gross salary, that is, before tax has been deducted. This includes your employer’s super guarantee contribution and salary sacrifice, as they both come out of your pay cheque before income tax.

The concessional contributions cap is $30,000 for the 2016/17 financial year for those under 49 years of age on 30 June 2016.

If you exceed this cap in a given financial year, you will be taxed extra on the amount above the cap.

Non-concessional contributions cap

Another limit is the non-concessional cap. The extra contributions you make out of your after-tax salary, or your spouse’s, are considered non-concessional contributions, as they have already been taxed. There is still a limit on how much you can contribute after tax, but it is far higher.

Currently, the non-concessional cap is limited to $180,000 per year. This will change (for most people) to $100,000 effective 1 July 2017, with some exceptions such as people aged 65 to 74 that meet the work test.

If you’re interested in learning more about these contributions, visit the Australian Taxation Office’s (ATO) website, where there are handy videos on both concessional and non-concessional contribution limits.


Spousal contribution


If you and your spouse or partner meet certain requirements, you may be eligible for an 18% tax offset for after-tax contributions into your spouse’s super account of up to $3,000. The maximum available tax offset is $540 where you’ve made a contribution of $3,000.

The following is a list of some of the requirements you need to meet. To find a full list, visit the Australian Taxation Office’s (ATO) website.

You and your partner must:

  • Both be Australian residents at the time of making the contribution(s)
  • Be living together on a permanent basis
  • Your partner’s total assessable income, including employer contributions to super and total fringe benefits, must amount to less than $13,800 per year

As for your super itself, sometimes it’s worth reviewing the different options to see if you can find a provider better suited to your needs. Talk to us today to see if Virgin Money Super fits your lifestyle.


The importance of providing your Tax File Number (TFN)

If you haven’t provided your Tax File Number (TFN) to your superannuation fund you may be paying more tax than you need to.

While you are not legally obliged to provide your super fund with your TFN, the tax implications of not doing so could impact the amount of super you will have at retirement.

What are the impacts?

  • You may end up paying extra tax on your super contributions.
  • You will not be able to receive the Government co-contribution in your super account, if eligible.
  • Your super fund may have to forward contributions received from your employer to the ATO as unclaimed money.

Government Changes to Superannuation

Superannuation regulation and rules are forever changing in Australia. It’s important that you stay up to date with the changes and how they might affect you.

Find out more about the key changes to super.


Important stuff

The information above is intended as a guide only. If you are unsure about who you need to make contributions for we suggest you contact the ATO.

As an employer, it's important you fully understand your superannuation obligations as failure to meet these minimum requirements could mean financial penalties from the Government.

QuickSuper is a registered trademark and a product owned and operated by Westpac Banking Corporation ABN 33 007 457 141. Westpac’s terms and conditions applicable to the QuickSuper service are available after your eligibility for the free clearing house service is assessed by Virgin Money Super.

This information is of a general nature only and does not take into account your personal financial situation, needs or objectives. As we don't know your financial needs we can’t advise if Virgin Money Super will suit you. Please consider the Product Disclosure Statement, Product Guide, Insurance Guide and Financial Services Guide before making a decision about the product. For further information about the insurance options refer to the Insurance Guide.

The Superannuation Fees described on the Fees page apply from 12 December 2016. Here you'll find the official Superannuation Industry (Supervision) Act 1993 ('SIS Act') definition for each fee type.

While there are no contribution, withdrawal or switching fees, a buy/sell spread applies at a fund level when purchasing and selling units. Other fees and costs may apply such as insurance fees. These are retained by the fund and are not paid to Virgin Money or the Trustee. All fees are inclusive of Goods and Services Tax (GST) and net of Reduced Input Tax Credits (RITC).

Before you rollover or consolidate your superannuation, you should check to see if insurance or other benefits will be impacted or lost. Some funds may also charge withdrawal or exit fees.

It is very important to note that superannuation is generally a long term investment. Past investment performance is not a reliable indicator of future performance and should never be the sole factor considered when selecting a fund. It is very important to note that superannuation is a generally long term investment and that past performance is not indicative of future performance.

Prepared by Virgin Money Financial Services Pty Ltd ABN 51 113 285 395 AFSL 286869. Virgin Money Super is a plan in the Mercer Super Trust ABN 19 905 422 981. Virgin Money Super is issued by Mercer Superannuation (Australia) Limited (MSAL) ABN 79 004 717 533 AFSL 235906 as trustee of the Mercer Super Trust. For more information about Virgin Money Super, please refer to the PDS which is available free of charge on our website or by calling the Customer Care team on 1300 652 770.

Source: https://www.ato.gov.au/About-ATO/Research-and-statistics/In-detail/Super-statistics/Super-accounts-data/Super-accounts-data-overview/

SuperRatings award reflects a funds' value for money, and is awarded based on a rating system of investment, fees and service. SuperRatings does not issue, sell, guarantee or underwrite this product. Go to www.superratings.com.au for details of its ratings criteria.

The amount shown is an estimate only of the Indirect Cost Ratio (ICR) generally expected to apply to these investments for 2016-2017 Financial Year.

Virgin Money Super’s fund returns shown above are net earnings and are calculated after the deduction of applicable taxes and costs. The results are current as at 31 January 2017. These results are provided by Virgin Money Super Asset consultants. It is very important to note that past performance is not indicative of future performance.

The median results are provided by SuperRatings and are current as at 30 June 2016 as a benchmark only. Virgin Money Super has not verified its accuracy so we can’t guarantee that it is correct, and accept no liability for inaccuracies, errors or omissions.

Eligibility crtieria and fees apply. Aged 15-64 Death and Total and Permanent Disablity cover. Automatic Insurance cover is subject to Exclusions including Pre-Existing Medical Condition exclusion. This means that, you won’t be covered for any illness, injury, condition or related symptom that you were aware of or should have been aware of, or had a medical consultation for, were planning to have a medical consultation for, or should have had a medical consultation for in the two years prior to cover commencement. See the Virgin Money Super Insurance Guide for more information.

Automatic Death & TPD cover for Australian residents aged 15-64 with our default insurance offering. Conditions and Exclusions (such as pre-existing medical conditions) apply. See the Virgin Money Super Insurance Guide for more information.

The case studies shown are hypothetical and are not meant to illustrate the circumstances of any particular individual. All claims will be assessed in accordance with the policy terms. In the event of any inconsistency with other material, the insurance policy terms will prevail.
For further information regarding Virgin Money Super’s insurance cover, including terms, conditions and eligibility, please refer to the Insurance Guide which forms part of the Product Disclosure Statement (PDS). The PDS is also available free of charge by contacting Customer Services on 1300 652 770.
This information is of a general nature and has been prepared without taking account of your personal needs, financial circumstances or objectives. Before acting on this information, you should consider the appropriateness of the information, having regard to your needs, financial circumstances and objectives. You should read the relevant Product Disclosure Statement available by calling 1300 652 770 and consider if this product is right for you before making a decision to acquire or continue to hold the product.