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
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