Tax On Superannuation Earnings After 60

While super is generally considered a tax-effective investment strategy, it does still attract some tax on its earnings while you are accumulating your savings.

However, once you move into the retirement phase, due to turning 60 and retiring for example, you usually stop paying tax on your investment returns.

There are two phases to a super fund, the accumulation phase and the retirement phase. The accumulation phase is what you will be in for the majority of your life and is when you will be putting money in to build your retirement nest egg. Conversely, the retirement phase is when you will be taking money out as an income stream to fund your retirement.

Accumulation phase tax

During the accumulation phase, the earnings that your super fund makes are still subject to tax, but the amount of tax payable is generally lower than that on a comparable investment outside of the super system. The earnings your fund makes should be taxed at 15%, and can in fact be lower in some situations. Capital gains that your super makes on assets held for over twelve months are effectively taxed at two thirds their value, meaning that you pay only 10%.

Further, if you hold Australian company shares, and the company has already paid income tax on their earnings, they might pass along to you a franking credit, which is then used to reduce your tax burden. This is done to avoid double taxation; you having to pay tax on already taxed income.

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Retirement phase tax

However, when you switch to the retirement phase, your investment earnings are generally tax free.  To be eligible to move into the retirement phase you need to meet one of four conditions:

  • Reaching preservation age and retiring
  • Reaching 65 years old
  • Suffering from permanent incapacity
  • Suffering from a terminal medical condition and are expected to die within two years

If you meet any one of the above four conditions, you may be able to transfer up to $1.6 million of your super fund into the retirement phase and begin drawing a pension from it. If you do so, the earnings that your remaining funds make will typically be tax free.

To compare super funds and read more about superannuation, click here.

Compare super funds with Canstar

The following table contains details of the superannuation funds rated by Canstar based on someone aged 40-49. This table has been sorted by one-year performance (highest to lowest).

Please note that the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.


Compare Superannuation

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