Tax-free Component (Super)

The tax-free component of a super benefit represents contributions made from after-tax dollars where no tax deduction was claimed, including non-concessional contributions, the crystallized amounts from pre-1983 super, capital gains tax exempt amounts, and certain government co-contributions. This component is always paid tax-free, regardless of the member's age, the type of benefit, or who receives it. The tax-free component provides certainty - once established, this portion of your super will never be taxed, whether paid as a death benefit to non-dependants, a disability benefit, or a retirement benefit at any age. This makes non-concessional contributions valuable for building a tax-free super balance. The proportion of tax-free component in your super balance is tracked by your super fund. When you make a withdrawal or receive a benefit, both components are paid proportionally. For example, if your balance is 20% tax-free component and 80% taxable component, any payment maintains this ratio. For super death benefits paid to non-dependants, having a higher tax-free component reduces the tax payable. While the taxable component may be taxed at up to 17%, the tax-free component is never taxed. Strategic use of non-concessional contributions can increase the tax-free component, particularly beneficial if you expect non-dependent beneficiaries.