Most super funds in Australia are taxed funds, which are taxed in 3 ways:
- On the way in – employer contributions and salary sacrifice contributions are taxed at 15%
- In the scheme – earnings on investments are taxed at 15%
- On the way out – depending on how you take your super and your age, you may be taxed when you withdraw your super.
However, some public sector schemes (such as the ETSA scheme before privatisation) are exempt from this and are known as ‘untaxed funds’. This is because the tax is only paid when the member takes their money, not on the way in. The tax on the benefits is higher than it would be for a taxed fund.
When ETSA was privatised, the scheme moved from being an untaxed fund with higher taxes on benefits to being a taxed fund with lower taxes on benefits, but with tax on employer contributions and investment earnings.