Accumulation phase tax relates to the tax rate levied on earnings and contributions made to a superannuation accumulation account.
Accumulation phase tax is paid by the super fund itself and effectively deducted from the relevant member’s balance.
The tax rate applied to earnings depends on the the type of investment return to be taxed.
There are two types of investment returns that are derived from investments. These are income and realised capital gains.
Income returns include, but are not limited to, bank interest, share dividends, rent and managed fund distributions.
Realised capital gains is the net profit made from selling an investment; calculated by deducting the cost base from the sale proceeds.
The tax applied to super contributions is based on the type of contribution and the level of personal income of the member.
Accumulation phase is an amount in a superannuation accumulation account.
You can leave your super in accumulation phase indefinitely. There is no requirement to withdraw it or use it to start a pension.
The accumulation phase value of a SMSF with a pooled investment strategy is calculated as the total amount that is not in pension phase.
Accumulation Phase Tax on Earnings
The tax rate on income earnings received from investments within accumulation phase is 15%.
Capital gains tax (CGT) levied on realised capital gains within accumulation phase is also 15%.
However, a 1/3rd CGT reduction is applied to realised capital gains received from an investment that was owned for longer than 12 months.
Therefore, gains from assets owned for longer than 12 months are only taxed at 10%.
| Earnings Type | Tax Rate | |
|---|---|---|
| Income | 15% | |
| Capital Gains (asset sold was owned for <12 mths) | 15% Capital Gains (asset sold was owned for >12 mths) | 10% |
For example, if earnings within super accumulation phase consisted of $10,000 in income and $20,000 in capital gains, the tax would be, as follows:
Income earnings tax = $10,000 x 15% = $1,500.
Capital gains tax = $20,000 x 15% = $3,000.
CGT would receive a 1/3rd discount if the investment sold was owned for more than 12 months, reducing the CGT to $2,000.
Have You Read My Other Posts Yet?
In a standard super accumulation account, the super fund trustee will simply apply the net (after-tax) earnings to a member’s accumulation account.
In a self managed superannuation fund (SMSF), the super fund trustees are usually also the members.
The trustees of the SMSF will complete a tax return at the end of each financial year.
Earnings tax owed from the result of the tax return will be paid by the SMSF and deducted from the relevant member balance.
Accumulation Phase Tax on Contributions
When contributions are made to a superannuation accumulation account, there may or may not be tax.
There are two types of contributions that can be made to super. These are Concessional and Non-Concessional contributions.
Non-Concessional contributions are not taxed when entering superannuation.
However, additional tax may be incurred by exceeding the non-concessional contribution cap.
Concessional contributions incur contributions tax of 15% when entering a super accumulation account.
An additional 15% is payable by high-income earners under the Division 293 tax provisions.
A high-income earner is an individual with an adjusted taxable income of $250,000 p.a. or more.
Lower income earners, earning $37,000 per yer or less, are eligible to receive the Low Income Superannuation Contribution, which is designed to effectively refund the 15% contributions tax to the member.
For standard superannuation accounts, the trustee of the super fund will deduct contributions tax at the time the contribution is made, then pay the net contribution amount into the member’s account.
For SMSFs, contributions are assessed as income to the SMSF and will need to be disclosed on the tax return at the end of the financial year.
The tax on these contributions are then paid when the Australian Tax Office (ATO) issues a Notice of Assessment (NOA).
Accumulation Phase Versus Pension Phase
Tax in accumulation phase is different to pension phase in some cases.
Unlike accumulation phase, there is no contributions tax in pension phase.
This is because contributions cannot be made to a pension account.
Pension phase is also often referred to as retirement phase or drawdown phase.
Super contributions can only be made to an accumulation account.
Tax on earnings in pension phase depends on the type of pension.
Have You Read My Other Posts Yet?
All pension accounts, excluding non-commutable account based pensions, receive earnings tax free. This includes income, interest, dividends, rent, distributions, capital gains, etc.
That is, the income rate and capital gains tax rate in pension phase is 0%.
A non-commutable account based pension has investment earnings taxed in the same way as an accumulation account, as noted above.
A non-commutable account based pension is otherwise known as a transition to retirement (TTR) pension or transition to retirement income stream (TRIS).
