Yes, you usually do pay tax on superannuation — but not all at once, and not at the same rate at every stage. Super is taxed at up to three points in its life: when money goes in, while it grows inside the fund, and when you take it out. The good news is that the tax rates inside super are generally lower than the tax on your regular pay, and withdrawals after age 60 are generally tax-free.
Quick answer: In a taxed super fund, before-tax contributions are generally taxed at 15%, investment earnings are generally taxed at up to 15%, and withdrawals from age 60 are generally tax-free. After-tax contributions are not taxed again when they go in, because you have already paid tax on that money. The Australian Taxation Office explains the three stages on its tax on super benefits page.
When Is Super Taxed?
Think of super tax as happening at three stages. Most people will only ever notice the first two, because the fund handles them behind the scenes.
| Stage | What is taxed | Usual tax rate |
|---|---|---|
| 1. Money going in | Before-tax (concessional) contributions | 15% |
| 2. Money growing inside the fund | Investment earnings in the accumulation phase | Up to 15% |
| 3. Money coming out | Withdrawals and income payments | Generally tax-free from age 60; tax may apply under 60 |
These rules apply to most super funds, which are known as “taxed” funds. A small number of older public sector funds are “untaxed” funds, where tax is instead paid when benefits are paid out. If you are in an ordinary retail, industry, or corporate fund, the taxed-fund rules below are the ones that apply to you.
Tax on Super Contributions
Before-tax contributions: 15%
Concessional contributions are contributions made before tax. They include your employer’s super guarantee contributions, salary sacrifice contributions, and any personal contributions you claim as a tax deduction. These are generally taxed at 15% inside your fund.
A simple example helps. If your employer contributes $100 of before-tax money to your super, the fund generally pays $15 in tax and $85 is added to your balance. For most workers, 15% is well below their marginal tax rate on wages, which is why super is often described as a tax-effective way to save for retirement.
For 2026-27, the general concessional contributions cap is $32,500 a year. If you go over the cap, the excess is added to your taxable income and taxed at your marginal rate, less a 15% offset for the tax already paid inside the fund.
After-tax contributions: no extra tax
Non-concessional contributions are made with after-tax money — for example, personal contributions you do not claim as a tax deduction. These are not taxed again when they go into your fund, because you have already paid income tax on that money. For 2026-27, the non-concessional contributions cap is $130,000 a year.
High-income earners: Division 293 tax
If your income plus your concessional contributions is more than $250,000 in a year, you may pay an extra 15% tax on some or all of those contributions under Division 293. That brings the total tax on the affected contributions to 30% — still below the top personal tax rate of 47% including the Medicare levy.
Low-income earners: a tax offset
At the other end of the scale, low-income earners may be eligible for the low income super tax offset (LISTO), a government payment of up to $500 into their super account. It is designed to make sure low-income earners do not pay more tax on their super contributions than they would have paid on their wages.
Give your fund your tax file number
This one is easy to overlook and expensive to miss. If your fund does not have your tax file number, it must take extra tax from your concessional contributions — up to 47% in total on those contributions — and it cannot accept personal contributions from you. Checking that your fund has your tax file number is one of the simplest tax checks you can do.
Tax on Investment Earnings Inside Your Super
While your super is in the accumulation phase — that is, while you are still working and building your balance — investment earnings are generally taxed at up to 15%. Some capital gains held for more than 12 months can attract a lower effective rate of 10%. You do not need to do anything about this tax; your fund deducts it before returns are credited to your account, so the returns you see are already after tax.
Once you retire and move your super into a retirement income stream, such as an account-based pension, investment earnings in that retirement phase are generally tax-free, subject to the transfer balance cap on how much you can move into retirement phase. For 2026-27, the general transfer balance cap is $2.1 million.
Very large balances attract extra tax. From 1 July 2026, an additional tax applies to earnings on the portion of a total super balance above $3 million. For most people this will never be relevant, but it is worth knowing the threshold exists.
Tax on Super Withdrawals
From age 60: generally tax-free
If you are 60 or over and you have met a condition of release — usually retiring — lump sum withdrawals and regular income payments from a taxed fund are generally tax-free. You do not pay tax on the tax-free component or the taxable component of the payment in this case.
Under age 60: tax may apply
If you withdraw super before age 60 after meeting a condition of release, tax depends on the make-up of your payment. Every super payment is split into a tax-free component and a taxable component. You never pay tax on the tax-free component — broadly, your after-tax contributions. The taxable component — broadly, your before-tax contributions and the earnings on them — may be taxed. For a lump sum, the taxable taxed element is generally taxed at your marginal rate or 22%, whichever is lower. For an income stream under 60, the taxable component is generally taxed at your marginal rate, with a 15% tax offset on the taxed element in some cases, such as disability benefits.
Preservation age and early access
You generally cannot access your super until you reach your preservation age — 60 for anyone born on or after 1 July 1964 — and meet a condition of release, such as retiring. Early access is only allowed in limited circumstances, such as severe financial hardship, permanent incapacity, or a terminal medical condition. Illegally accessing super early is a different matter entirely: the whole amount can become taxable.
Tax on Death Benefits
Super paid out after a member’s death is also taxed, and the tax depends on who receives it. Death benefits paid to a tax dependant — such as a spouse or a child under 18 — are generally tax-free. Benefits paid to a non-dependant, such as an adult child, may be taxed on the taxable component. This is one area where getting advice before a payment is made can make a real difference to the outcome.
How to Reduce the Tax on Your Super
You cannot avoid super tax altogether, and you should not try to. But there are legitimate ways to keep it as low as the rules allow:
- Stay within your caps. Going over the concessional or non-concessional caps triggers extra tax and paperwork. Check your contributions during the year, especially if you change jobs or make extra contributions.
- Use carry-forward concessional contributions. If your total super balance was below $500,000 at the end of the previous financial year, you may be able to carry forward unused concessional cap amounts from the past five years and use them in a later year.
- Check your tax file number is on file. As noted above, a missing tax file number can push contributions tax as high as 47%.
- Consider spouse contributions. Splitting contributions with a spouse or making spouse contributions can help balance two super accounts and, in some cases, attract a tax offset — although eligibility rules apply.
- Plan withdrawals after 60. Where you have a choice about timing, withdrawing after 60 generally means no tax on the payment, which can be a strong reason not to rush an early withdrawal.
If you want to understand how the whole system fits together, our guide on how superannuation works explains contributions, investment options, and retirement income streams in plain language. If you are changing jobs, our guide to the superannuation standard choice form explains how to tell your new employer which fund to pay into.
Frequently Asked Questions
Do you pay tax on superannuation when you retire?
Generally no. If you are 60 or over and have retired, lump sums and income payments from a taxed fund are generally tax-free, and investment earnings in the retirement phase are generally tax-free as well.
Do I pay tax on my employer’s super contributions?
Your fund generally pays 15% tax on your employer’s before-tax contributions. You do not pay that tax separately, and it does not appear in your take-home pay. If your income plus concessional contributions exceed $250,000, Division 293 tax may add another 15%.
Do I pay tax on after-tax super contributions?
No. After-tax (non-concessional) contributions are not taxed when they go into your fund, because you have already paid income tax on that money. You may still pay tax on the earnings those contributions generate inside the fund.
Is super taxed more than a regular savings account?
Usually it is taxed less. Investment earnings inside super are generally taxed at up to 15%, while interest from a savings account is taxed at your marginal rate, which can be as high as 47% including the Medicare levy.
What happens if I do not give my fund my tax file number?
Your fund must take extra tax from your concessional contributions — up to 47% in total — and it cannot accept personal contributions from you until you provide it.
This article is general information only and is not personal tax or financial advice. Super tax rules and caps change over time, so check the current rules or speak to a registered tax agent or licensed financial adviser before making decisions about your super.
