HOW TAX WORKS IN AUSTRALIA’S SUPERANNUATION SYSTEM
Cogger Gurry • February 13, 2025
Australia’s super system plays a vital role in ensuring financial security for individuals in retirement. However, how superannuation is taxed can appear complex.
In Australia, superannuation is taxed at three main points: contributions, investment earnings and withdrawals. This structure is known as a TTE (taxed, taxed, exempt) system: contributions to the superannuation fund are taxed and the investment earnings within the fund are also taxed, but withdrawals made during retirement are generally exempt from tax. That is, in Australia’s system:
- Contributions, including those made by employers under the super guarantee (SG) and voluntary concessional contributions, are taxed at a concessional rate of 15%. This is lower than the rates that apply to most other forms of income, providing a tax advantage.
- Earnings generated from fund investments during the accumulation phase are also taxed at a flat rate of 15%. This is beneficial because it’s lower than the tax rates that typically apply to investment income earned outside of superannuation.
- Withdrawals made during retirement are generally tax-free. This is intended to enhance the appeal of building super savings over your working life, ensuring you have a tax-effective income stream in retirement.
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If you have paid wages to employees in the 2025 financial year you will need to make a finalisation declaration by 14 July 2025 to ensure your employees can access their finalised information to complete their tax return. When you have reported and finalised your employees' information through STP, you are exempt from: providing payment summaries to your employees lodging a payment summary annual report. For payments to your employees that were not reported through STP, you still need to: give a payment summary to your employees provide the ATO with a payment summary annual report for these payment summaries. For small employers (19 or fewer employees) who only have closely held payees, the due date for end-of-year STP finalisation is the payee's tax return due date. If you would like to know more, you can visit Here
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