Contributions Tax
A 15% contributions tax applies to all concessional contributions, which is normally lower than your marginal tax rate. Concessional contributions to your super come from before-tax income and include:
- Employer contributions
- Salary sacrificed contributions through your pay
- Personal contributions you claimed as a tax deduction
The 15% contribution tax is deducted from concessional contributions and paid directly to the Australian Taxation Office (ATO). However, if you have not given us your tax file number, you could be taxed at the top marginal rate of 47% (including the Medicare levy).
Non-concessional (after-tax) contributions are not subject to tax within super as they have already been taxed.
Are you a higher-income earner?
If your total annual income exceeds $250,000, Division 293 tax of an additional 15% applies to any before-tax (concessional) super contributions. This means you will pay 30% tax on concessional contributions instead of the standard 15%.
If your concessional contributions push your total annual income over the $250,000 threshold, the additional 15% tax will only apply to those amounts in excess of $250,000 up to the concessional contributions cap. Total income is defined in a similar way to that for Medicare levy surcharge purposes.
There are limits to how much you can contribute
The Australian Government puts a limit on the amount of before-tax money (concessional contributions) and after-tax money (non-concessional contributions) you can put into your super. Exceeding the caps could mean paying higher tax.
Find out more in our Contribution caps information sheet.
Tax for exceeding the $1.9 million general transfer balance cap
There is a $1.9 million cap on the amount of money that can be transferred from super into a pension (where the investment earnings are tax free) from 1 July 2023. The transfer balance cap applies to current retirees and anyone yet to enter the retirement phase.
The general transfer balance cap was indexed from $1.7 to $1.9 million on 1 July 2023. As a result, there is not a single cap that applies to all individuals and if you started your income stream in a previous financial year, a lower cap may apply. Every individual will have their own personal transfer balance cap of between $1.6 and $1.9 million, depending on their circumstances.
Amounts above the cap are subject to a transfer balance tax based on ‘notional earnings determined by a legislative formula’. The tax is payable to the ATO for each day the amount remains in excess of the cap. The cap does not include investment earnings in your income stream account (so if your retirement income stream account balance grows over your personal cap amount, you don’t need to do anything).
To keep your balance below your transfer balance cap, you can either transfer the excess amount to a Brighter Super Accumulation account where earnings are taxed at 15% or withdraw the money from your Brighter Super Pension account.
The transfer balance cap is indexed in $100,000 increments and will grow in line with the consumer price index. Additional income tax rules may apply to defined benefit income streams.
Investment earnings tax
Money put into your Accumulation account or Transition to retirement (TTR) pension account is invested, with investment earnings taxed at a maximum of 15%. However, the actual tax rate payable by super funds is generally less than 15% because of allowable deductions, tax credits and offsets.
The investment earnings applied to your account have already had fees and taxes deducted. Pension account investment earnings remain tax free.
Tax on lump-sum withdrawals
Any lump sum you withdraw from Brighter Super is generally made up of two components: tax-free and taxable. You cannot choose to make a withdrawal tax free. Any withdrawal is made proportionally from both components.
Tax free
The tax-free component includes any pre-July 1983 component at 30 June 2007 and all after-tax contributions paid in, such as:
- Voluntary or extra member contributions for which no tax deduction has been claimed
- Super co-contribution
- Spouse contributions received
- Any tax-free components of money transferred from other super funds to Brighter Super
- Any tax-free components of eligible termination payments transferred to Brighter Super
- Any amounts that are tax-free as a result of total and permanent disability or terminal illness
- Capital gains tax-exempt contributions (lifetime limit)
Taxable
The taxable component generally includes:
- Employer and salary sacrifice contributions
- Member contributions for which a tax deduction has been claimed
- Investment earnings
| If you are... |
Taking a lump sum |
| Under preservation age |
Taxed at 22%* |
| Between preservation age and 60 |
Tax free for the first $245,000 in 2024/25. Remainder taxed at 17%* |
| 60 or over |
Tax free |
| * includes Medicare Levy |
Tax on pension payments
The tax for pension payments on pensions is shown below.
| If you are... |
Taking a pension |
| Between preservation age and 59^ |
Taxable component of pension income will be taxed at marginal tax rates with a 15% tax offset applied. |
| 60 or over |
Tax free |
| ^ Assumes you have provided your tax file number (TFN) to the fund. |
See our Pension accounts Product Disclosure Statement for more details.
Tax on death benefits
Death benefits are tax-free if paid to a dependant.
If the benefit is paid to someone who is not considered a dependant, the taxable portion of the benefit is taxed at 17% (including Medicare levy) and the untaxed component is taxed at 32% (including Medicare levy).
Find out more in our Death Benefits information sheet.
Tax on disability or terminal illness
If you suffer a total and permanent disability before the age of 60, an additional portion of your benefit will become tax free. If you become terminally ill, your full benefit will be tax free.
