CPD: Super and tax – just the facts


Advisers need to have a sound understanding of the varied tax regimens as they are applied to clients’ superannuation savings, in both the accumulation and drawdown phases.

While superannuation is arguably the most tax-effective way to save for retirement, it’s not tax free. This article, proudly sponsored by Allianz Retire+, explores tax as it applies to your clients’ super savings.

Australia’s total superannuation assets were $3.54 trillion at the end of the September quarter last year[1], which makes our nation one of the seven largest pension markets in the world.[2]

During the September quarter, employer contributions totalled $31.8 billion while member contributions totalled $17.7 billion over the same time period. They are big numbers that keep superannuation firmly in the sights of government agencies (including the ATO) and regulatory bodies. While such scrutiny serves important roles to ensure the security of the nation’s retirement savings, it also leads to what some call ‘tinkering’ with the system.

Although a famous quote would have us believe that death and tax are the only certainties, so too is change. And change is something that advisers are well acquainted with, particularly when it comes to superannuation – and tax. The rules pertaining to super contributions, earnings and withdrawals – including the way each of these is taxed – are subject to regular review and change.

Keeping up with the taxation system and how it applies to all investments is important, as is being able to simply explain these machinations to your clients. After all, by keeping up-to-date with the ever-changing tax and super laws, you demonstrate your commitment to your clients and provide them with comprehensive and tailored financial solutions.

How super is taxed

Super may be taxed at three points throughout its life cycle – on contributions, investment earnings and withdrawal. It’s generally taxed at a lower rate than regular income, and withdrawals are tax-free if a client is 60 years or older. However, it’s not as straightforward as that; there are different categories of contributions, the approach to taxing earnings differs from accumulation to retirement phase and withdrawals have a large number of permutations attached. The tax treatment of defined benefit pensions differ from allocated pensions.


Limits apply to both concessional and non-concessional contributions that limit the amount your clients can contribute to superannuation each year before incurring additional tax.

Concessional contributions are those made before tax and include employer super guarantee (SG) contributions, salary sacrifice contributions and other personal contributions where your client can claim a tax deduction.

Non-concessional contributions are after tax contributions made by your client or their employer. Clients over the age of 75 may not make voluntary contributions to their super but may receive SG contributions from an employer. If a client has $1.9 million or more in the super system on 30 June in the previous financial year, they’re not able to make non-concessional contributions.

In the situation where a client exceeds their contributions cap (or limit), additional tax becomes payable. Only the amount above the relevant limit is subject to additional tax; for example, if your client contributed $10,000 over the limit, extra tax is charged only on $10,000. Concessional contributions that exceed the cap are taxed at the client’s marginal tax rate (including Medicare Levy).

For the 2023-2024 financial year, the contributions caps are:

  • Concessional contributions – $27,500
  • Non-concessional contributions – $110,000

Any excess concessional contributions will count towards the non-concessional contributions cap.

It’s been flagged that from 1 July 2024, there’s likely to be an increase in each of the concessional contributions (to $30,000 per annum), non-concessional contributions (to $120,000 per annum) and transfer balance cap (from $1.9 to $2 million).[3]

Investment earnings

One of the key features that makes super such a good retirement savings vehicle is the reduced tax on investment earnings. During the accumulation phase, earnings are taxed at 15 percent and are deducted from those earnings by the fund. Once a client opens a retirement income stream, investment earnings are tax-free.

Where a client takes a lump sum and invests it outside of superannuation, investment earnings may be subject to tax.


Clients must satisfy a condition of release to withdraw money from super. Conditions of release include:

1. The client turns 65, even if they haven’t retired

2. The client reaches preservation age and retires (figure two).

3. The client commences a transition to retirement income stream (TRIS) while continuing to work full or part time.

A TRIS strategy enables your client to top up the income received from their employment with a regular income stream from their super once they have reached their preservation age. This income stream enables your client to either reduce their working hours without reducing their income or continue working and increase salary sacrifice contributions to boost the value of their super.

A TRIS is a non-commutable super income stream; it must be an account-based income stream that cannot be converted into a lump sum until the member meets a condition of release with nil cashing restrictions.

There are restrictions on the amount a client can withdraw via a TRIS in any one financial year. A client under 65 years old must receive a minimum of four percent and a maximum of 10 percent of the balance of their super funds each financial year.

The exception to this is if and when your client meets a ‘nil cashing restriction’ such as they:

    • reach preservation age and retire
    • turn 65
    • become permanently incapacitated
    • are diagnosed with a terminal medical condition.

Satisfying a condition of release with a nil cashing restriction (as above) means that the pension is no longer subject to the restrictions that are generally characteristic of a TRIS.

When implementing a TRIS strategy, you and your client need to decide from which payer to claim the tax-free threshold on the client’s Tax file number declaration. If the client claims the tax-free threshold with both an employer and the super fund, they may face a tax liability at the end of the financial year.

A TRIS automatically rolls into the retirement phase as soon as your client reaches 65 years old. For the other conditions of release listed above, the client needs to notify their super fund to instigate the move from TRIS to the retirement phase.

4. The client satisfies an early access requirement, such as they:

    • Can claim on medical, compassionate, hardship or incapacity grounds
    • Can claim to withdraw voluntary contributions under the First Home Super Saver scheme
    • Are a temporary resident who is permanently leaving Australia

Tax offsets

Those clients who are retired or over 60 may be eligible for tax offsets; this is dependent on their income and assets, where their income is derived and whether they are fully or partly retired.

The relevant offsets are the:

  • seniors and pensioners tax offset (only available to those who qualify for the Age Pension)
  • lump sum tax offset
  • super income stream tax offset.

Most super accounts are comprised of taxed and untaxed elements. A client receiving income from a super income stream may be eligible for a tax offset equal to:

  • 15% of the taxed element
  • 10% of the untaxed element.

The tax offset amount available to your client on the taxed element will be shown on the PAYG payment summary received from their super fund at the end of each financial year.

The tax offset amount the client can claim on the untaxed element will not be shown on this payment summary and is subject to a cap (figure three).

Tax offsets cannot be claimed for the taxed element of any super income stream your client receives before they reach their preservation age, except where the super income stream is a disability super benefit or death benefit income stream.

Lump sum withdrawals

Lump sum withdrawals may be subject to tax (figure four), especially if the client has not reached preservation age; for those under, 60 lump sum payments may be accessible only if special circumstances are met.

The low rate cap amount is the limit set on the amount of taxable components (taxed and untaxed elements) of a super lump sum that can receive a lower (or nil) tax rate. It applies to clients who have reached their preservation age but are below 60 years. It’s a lifetime cap that’s reduced by any amount previously withdrawn and applied to the low rate threshold.

Once a lump sum is withdrawn from a super account, it’s no longer considered to be super. If your client invests the money, earnings on those investments are not taxed as super and generally need to be declared in the client’s tax return.

Defined benefit pensions

Income received from a defined benefit pension is generally comprised of three components:

  • a tax-free component
  • a taxable component already taxed
  • an untaxed taxable component.

The untaxed component is included in your client’s assessable income and tax is paid at their marginal tax, rate less a 10 percent tax offset. However, if the client is over 60, the tax-free and taxable component are generally received tax free and are not assessable.

This changes when the client’s total annual pension payments are above the defined benefit income cap, which is $118,750 for the 2023-24 financial year. In this scenario, the client will lose the 10 percent offset above this amount. In addition, 50 percent of the tax free and taxable components above this amount become taxable.

In conclusion, the importance of financial advisers understanding the intricacies of the tax regime as it applies to super system cannot be overstated. As you navigate the complexities of the financial landscape with your clients, the relationship between tax and super underscores the pivotal role that you play in optimising retirement outcomes for your clients.

In a dynamic and volatile economic environment, where legislative changes are frequent and clients may be fearful of the impact of market gyrations on their retirement savings, those advisers who possess a deep understanding of the taxation nuances within the superannuation framework are better positioned to provide relevant and up-to-date advice.


Take the FAAA accredited quiz to earn 0.25 CPD hour:

CPD Quiz

The following CPD quiz is accredited by the FAAA at 0.25 hour.

Legislated CPD Area: Tax (Financial) Advice (0.25 hrs)

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Superannuation Statistics, ASFA, 31 September 2023
[2] Global Pension Assets Study – 2023, Thinking Ahead Institute, February 2023
[3] https://www.smsfadviser.com/news/23175-concessional-contribution-cap-looks-set-to-rise-on-1-july

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