Investment income tax (superannuation earnings tax)
Your super fund investment earnings (such as interest, dividends and rental income) are generally taxed at 15% when you are in the accumulation phase (i.e. making contributions to your fund), less any allowable tax deductions or credits (e.g. franking credits from Australian shares under the dividend imputation system).
Franking credits are the tax that a company has already paid on a share dividend. Super funds (including self-managed super funds) can use these credits as an offset against their taxable income.
In addition, all Australian super funds are liable to pay capital gains tax on any capital gains made on the sale of capital assets (e.g. shares or property). The capital gain is the difference between the selling price of the asset and its cost base. This gain is taxed at 10% if the asset is held for longer than 12 months. Capital gains made on the sale of assets that are held for less than 12 months are taxed at 15%.
However, if your super is in the retirement phase, there is no tax on your investment earnings. It’s important to understand that there is a transfer balance cap which limits the amount of your funds that can be transferred from the accumulation phase to the retirement phase. This cap is currently $1.6 million.
Learn more about the key aspects of investment income tax (earnings tax) in the following SuperGuide articles:
Set out below are all SuperGuide articles that relate to Investment income tax (superannuation earnings tax).