Tax Component (Super)

Every superannuation benefit comprises two components: the tax-free component and the taxable component. The taxable component represents amounts that have received concessional tax treatment during accumulation, including employer contributions, salary sacrifice contributions, personal deductible contributions, and earnings on all contributions. When a superannuation benefit is paid, the taxable component's tax treatment depends on several factors: the type of benefit (death, disability, or retirement), the age of the member, whether it's paid as a lump sum or income stream, and the relationship of the beneficiary to the member. For death benefits paid to non-dependants (such as adult children), the taxable component is taxed at 15% plus 2% Medicare Levy (17% total) on the taxed element, or 30% plus 2% Medicare Levy on the untaxed element. For tax dependants (spouse, children under 18, financial dependants), death benefits are generally tax-free. For disability superannuation benefits paid due to permanent incapacity, the taxable component is tax-free if the member is permanently incapacitated or has a terminal medical condition. For standard retirement benefits after age 60, lump sum payments are tax-free regardless of components. Before age 60, the taxable component may be taxed at marginal rates (less a 15% tax offset for the taxed element).