Taxation of Superannuation entitlements

 Under Section 46B of the Income Tax Act, tax is to be applied to all member benefit payments at the time of exit.

 Tax is applied only on the Employer and Interest component of members’ super balances. The Employee component is NOT taxed.

Below is a table of how tax is applied to Employer contributions and any Interest credited to the member when a member exits.

Rate of Tax Applied to Employer contributions and Interest Years of contribution or situation
Marginal rate of Tax Less than 5 years
The Lesser of 15% or the marginal tax rate

Greater than 5 years

Less than 9 years

The lesser of 8% or the marginal tax rate

Greater than 9 years

Less than 15 years

2% tax

Greater than 15 years

Or under the following circumstance:

1.       Death exits

2.       Medical Exits

3.       Member is over 50 and has contributed more than 7 years

4.       Member is 55 years of age


The more years a member contributes, the less tax they will have to pay when they exit the Fund


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