What is the accumulation phase of superannuation?

Finance Writer · 5 October 2021
From the time you start work to after you retire, your superannuation will typically go through three different phases, with each having differing tax implications. The first stage of your super is the accumulation phase. In this article, we’ll look at what the accumulation phase involves, how much you’re likely to be taxed and how to move your nest egg between phases.

What is the accumulation phase of superannuation?

The accumulation phase of superannuation is the initial period when you are contributing money for your retirement and is generally the longest phase of your superannuation. All these funds are locked away, or ‘preserved’, until your retirement.

During this phase, your employer will make minimum contributions to your super fund of 10% of your salary or wages (as at 1 July 2021), called super guarantee (SG) contributions, according to the ATO.

During the accumulation phase, you can also make additional contributions. You can make additional voluntary contributions with your net income (after tax) or salary sacrifice contributions if organised with your employer. In a salary sacrifice arrangement, a percentage of your salary (nominated by you) will be paid into your super fund, instead of to you.

If you are self-employed as a sole trader or in a partnership, while you are not legally obligated to make salary contributions, you could consider making contributions to your fund during the accumulation phase to prepare for retirement.

How much is your super taxed during the accumulation phase?

The amount of tax you pay on your super depends on your contributions, what phase of superannuation you’re in and your personal circumstances. However, as a general guide, there are a few different times that tax comes into play during the accumulation phase, according to the ATO:

  • When your employer makes contributions into your super account on your behalf, 15% is taken off the total amount as tax (although there are exceptions);
  • When you make a contribution via salary sacrifice, called a concessional contribution, 15% is taken off the total amount as tax (although there are exceptions);
  • The funds in your super account could also be taxed if they increase due to earnings on investments (such as interest and dividends), at a maximum rate of 15% (less any tax deductions or credits);
  • When you take money out of your super fund during the accumulation phase, you could pay tax, depending on how and when you withdraw it (in which case, the Moneysmart website recommends seeking suitably qualified professional advice);
  • When someone dies and you inherit their superannuation funds, you may be required to pay tax depending on a number of factors (again, Moneysmart recommends seeking professional advice).

TIP: Have you given your Tax File Number (TFN) to your super fund? The ATO states that if a super fund does not have your TFN, you could be charged extra tax.


MoneySmart states:

  • Super contributions might not be taxed if you earn $37,000 or less.
  • An extra 15% tax would likely be charged in your income and super contributions combined are more than $250,000
  • There are also limits to extra contributions you can make to your super fund each year without having to pay extra tax. These are called ‘contribution caps’. While every super fund has a contribution cap, the amount varies, so it’s a good idea to know the maximum contribution amount for your fund.
  • Any non-concessional contributions, or money paid into a super account from your after-tax income, are not taxed.


When can you move your super out of the accumulation phase?

There are typically two additional phases of superannuation which follow accumulation; the pre-retirement phase and the retirement phase. However, there is no obligation for you to move your super away from the accumulation phase. The additional phases are:

  • Pre-retirement phase: once you have reached your preservation age (the age at which you can access your super), you have the option of considering what the ATO refers to as a transition to retirement income stream (TRIS). The TRIS is a way of topping up your part-time income with a regular stream of income from your super savings.
  • Retirement phase: If you have reached age 65, have retired and you satisfy a condition of release (rules from your super provide on when you can access your super), then you have the option of moving your super into the retirement phase, which allows you to access your super either through a lump sum payment or as a super income stream.

Can you leave any super in the accumulation phase?

Once you retire, you are not obliged to withdraw your super or start a super income stream. You can keep it in the accumulation phase. Depending on your superannuation provider, if you satisfy your condition of release, you may also be able to consider making ad-hoc withdrawals from your super account.

If you are transitioning from the accumulation phase to the retirement phase, there is a limit on how much you can move across. This is called the transfer balance cap, which the ATO currently reports is $1.7 million. Amounts in excess of this cap must remain in the accumulation phase.


Cover image source: Peterfz30/Shutterstock.com

Sub edited by Milan Cuk.

Thanks for visiting Canstar, Australia’s biggest financial comparison site*