Superannuation and different tax structures

Whilst in accumulation phase, superannuation funds can account for tax differently and there is not a one size fits all. What tax do funds pay? Well, they pay usually 10% on capital gains (if held longer than 12 months) and 15% on other income and concessional contributions (within limits). They are also entitled to tax deductions – for example certain fees and insurance premiums.

A few examples of the different tax structures can be found in an SMSF or a “Wrap” super fund where it is “individualised”, or in an industry fund it is generally “pooled” and there are also other funds like SuperSA Triple S here in South Australia where it is “untaxed”.

An “individualised” structure means your fund does a tax return each financial year, and you pay the exact tax you are supposed to pay based on what has gone in and out of your account.

A “pooled” structure means you aren’t necessarily paying the tax based on your current situation, industry funds generally use this method and can “pool” gains and expenses and split them between members, in some cases this can work better for you and other cases it might not work better for you.

A “untaxed” structure means that the fund isn’t paying ANY tax along the way – therefore when you leave/exit the fund, you are required to pay 15% on all the untaxed components. This might sound like a lot of money upon exiting the fund, however you have had the benefit of more money being invested over the long term and the compound effect of having more money invested.

The above is just a general summary and there can be other tax consequences in addition to what is mentioned above which is why it is important to seek advice before making changes. Everyone’s situation is different and it is always good that you understand what you are invested in and the tax consequences along the way within your superannuation fund.