Australia has a very generous superannuation tax regime. It is really an alternative tax system, and it pays to get as much money into super as possible.
The essence of the super system is as follows:
- You can contribute up to $25,000 per annum to superannuation, and claim the contribution as a tax deduction against your income. The super fund must deduct a 15% contributions tax from your contribution, but this still leaves you ahead if your personal marginal tax rate is more than 15%
- In addition, you can contribute $100,000 per annum to super as a non-tax deductible contribution. There is no 15% contributions tax on such contributions. The idea here is to get as much capital as possible, up to a super balance limit of $1.6 million, into the 0% ~ 15% tax superannuation system.
- During your working life when you are contributing to a superannuation fund (accumulation mode), its earnings are taxed at a low 15%.
- When you retire and start receiving a superannuation pension (pension mode), the fund’s earnings are tax free, up to a super balance limit of $1.6 million (indexed), and a low 15% tax on earnings above this balance.
- From age 60 all withdrawals paid to you from super are tax free.
We can assist you to set up your own self managed super fund, which will give you greater flexibility, transparency, and lower costs.