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Taxing issues

To encourage people to use super to save and invest for retirement, the government provides a number of tax incentives. For example, investment earnings on super are taxed at a low (concessional) rate and you pay no tax on investment earnings on an income stream, such as Telstra Super RetireAccess. Read on to find out more about tax and your super.

Contributions

Contributions tax

Any employer contributions up to the pre-tax contributions limit are subject to a 15% contributions tax. This tax is deducted from your account at the end of the year, or if you leave the fund during the year the tax will be deducted at that time.

Post-tax contributions up to the post-tax contributions limit are not subject to any further tax.

Excessive contributions tax

The ATO will monitor all pre-tax and post-tax contributions made to your Telstra Super account on your behalf. The ATO will notify you if your contributions exceed the caps. Contributions in excess of the caps are taxed as follows:

• Tax on excessive pre-tax contributions: 45% (plus Medicare levy). May be paid directly to the ATO or you may instruct the Trustee to release funds to meet the liability.
• Tax on excessive post-tax contributions: 45% (plus Medicare levy). Cannot be paid directly to the ATO, you must nominate a super fund to release monies to meet the liability.

Investment returns

Investment returns applied to your super account are before tax and investment management fees. Investment returns are taxed at the low (concessional) rate of 15%. This tax is taken out as part of the calculation of unit prices. Investment returns are tax-free for Telstra Super RetireAccess members.

Tax on lump sum withdrawals

Generally your balance may consist of both non-preserved and preserved components. Preserved super cannot be withdrawn until you reach preservation age.

The current tax rules on lump sum withdrawals from a taxed source:

Tax on payments from an income stream, such as Telstra Super RetireAccess, are treated differently to ordinary lump sum withdrawals. For more information on how income streams are taxed, select Telstra Super RetireAccess in the My Super section of this website and read the information on Tax and my income stream. 

Tax-free components

From 1 July 2007, to ensure tax components decrease proportionately, any withdrawals from your account will include tax-free and taxable components relative to your account balance. For example, if your taxable component is equal to 70% of your account balance, then 70% of your withdrawal will be made from your taxable component.

For income stream payments, these components are as at commencement date of the income stream.

Spouse tax offset

If a contribution is made to an eligible partner's account by 30 June each financial year, the contributing partner may be able to claim a tax offset of up to $540 pa.

Contributing partners may be able to claim an 18% tax offset on the first $3,000 of contributions made each financial year to their eligible partner’s account, provided their partner’s income is $10,800 or less. Contributing partners may be eligible for a partial offset if the eligible partner’s income is over $10,800 but not greater than $13,800 a year. The offset on the contributions (up to $3000) is reduced by one dollar for every dollar that income exceeds $10,800 pa, to the maximum of $13,800, when the offset no longer applies.

The following conditions must be met to be eligible:

• the receiving partner must meet the criteria for an eligible partner.
• the contribution must be made post-tax.
• both you and your partner were Australian residents when the contributions were made.
• you and your partner were not living separately and apart on a permanent basis.
• the sum of the eligible partner's income - the total of their assessable income and reportable fringe benefits was less than $13,800.
• if the recipient is aged 65-70 they must be gainfully employed for at least 40 hours in a period of not more than 30 consecutive days in the current financial year.

Please be aware current Government legislation excludes same sex couples.