As an incentive to save for retirement, superannuation is taxed concessionally.

When you're investing money for retirement, there are several tax advantages with super.

• Lower tax on income.
  On our salaries and other income, we pay tax at marginal rates which range from 0–45%. However, super funds are taxed at a flat rate of 15% and the actual tax paid is often less because of tax deductions and tax offsets. Super fund income includes all investment income, employer contributions, and contributions for which a tax deduction has been claimed.
• Lower tax on capital gains.
  Capital gains made by super fund investments are effectively taxed at 10%.
• Lower, or no, tax on lump sum payments.
  Amounts cashed out between age 55 and 60 are concessionally taxed and subject to the low rate cap. The low rate cap allows members in this age group to access the first $145,000 of their taxable component without paying any tax. Amounts cashed out from age 60 are tax-free.

The tax incentives are even better when you start drawing a regular income from a superannuation pension in retirement.

• Tax concessions on pensions.
  Super pensions paid to members aged 55 to 60, or who are totally and permanently disabled, receive a 15% tax rebate on the taxable portion of their pension. Once you reach age 60, your pension is paid to you tax-free.