Super taxation schedule summary.

The misleading political allegation that since superannuation funds do not pay tax, retirees should not receive cash imputation credits, prompted me to research the accuracy of the statement.

I have resourced the information in the summary below from Trish Power’s superannuation website:


Summary of how Super Funds are Taxed

Contributions Tax < $250,000 income p.a. –  15%
> $250,000 income p.a., if concessional contribution – 30%

Transition  to Retirement Pensions Tax – capped at $1.6 million indexed periodically  – 15%

Superannuation Earnings Tax in accumulation phase
15% – on investment income, less if there are imputation dividend credits, and less on capital gains.
45% – on non-arm’s length SMSF investment income.

Superannuation Earnings Tax in Retirement phase. (conditional on minimal pension payments being made).
Currently Funds eligible for imputation credits in cash from ATO.

Retirees no longer receive income from their personal exertion and are thus dependent on their savings plus any income it may earn, and supplemented, subject to asset and means tests, with the aged pension. Not having to pay tax assists retirees to be less dependent on government subsidies, and provides some compensation for inflation driven erosion of the value of their savings.

They may not now have to pay Income Tax on their yearly tax return, but this is because they are largely now living on savings on which they paid 15% contributions tax when contributed years ago, and 15% if they set up a transitioning to retirement pension.

Labor’s proposal for the ATO to not pay cash Imputation credits to retirees is smart politically. It can be sold to the electorate as a measure to redistribute wealth from Self Managed Super Funds, and initially estimated to save government about $56 billion a year. It would exempt a double-dipping government from having to compensate shareholders who no longer have sufficient tax liability to offset a tax credit.

It would however be a massive diversion of investment income from retirees living longer, to government coffers.


Categories: Superannuation


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