SUPERANNUATION

Taxation on Benefit Payments

New taxing arrangements on superannuation benefit payments commenced on 1 July 2007.
Superannuation benefits comprise two components as follows:
 
The tax free component
The taxable component
 
  • The taxed element (paid out of a superannuation fund that pays tax)
  • The untaxed element (paid direct from Commonwealth Revenue)
 
Superannuation pension payments

Only the taxable component of a pension may be subject to tax.  The taxed element of the taxable component is subject to tax for those under age 60 and tax-free for those aged 60 and over.  The untaxed element of the taxable component is always subject to tax.
 
The proportions of the pension that comprises a tax-free component, a taxable component consisting of a taxed and untaxed element is determined at the time the pension is commenced.  The same proportions continue for the reversionary pension.  Any commutations during the payment of the original or reversionary pension will not change the proportions.

Taxing of the taxed and untaxed elements of the taxable component of the pension payment – the tax-free component is always tax-free
 

Age of
pensioner or recipient

Taxable component – taxed element of the pension

Taxable component – untaxed element of the pension

Under preservation age

Assessable income and taxed at marginal tax rates Assessable income and taxed at marginal tax rates

Preservation age to age 59

 Assessable income and taxed at marginal tax rates with a 15% tax offset Assessable income and taxed at marginal tax rates

Aged 60 and over

 Tax-free (not assessable income) Assessable income and taxed at marginal tax rates with a 10% tax offset

Reversionary pensions paid to a dependant

Both deceased and recipient under age 60

 Assessable income and taxed at marginal tax rates with a 15% tax offset Assessable income and taxed at marginal tax rates

Either deceased or recipient aged 60 and over

Tax-free (not assessable income) Assessable income and taxed at marginal tax rates with a 10% tax offset
 
Superannuation lump sum payments
Taxing of taxed and untaxed elements of the taxed component of the lump sum – the tax-free component is always tax-free
 

Age of
pensioner member

Taxable component –
taxed element

Taxable component –
untaxed element

Under preservation age

Assessable income and taxed at 20% Assessable income and taxed at 30% to $1.1M and then taxed at 45% on balance over $1.1M

Preservation age to age 59

 Assessable income with zero tax to $150,000 then taxed at 15% on balance Assessable income and taxed at 15% to $150,000 then taxed at 30% on balance to $1.1M and then taxed at 45% on balance over $1.1M

Aged 60 and over

 Tax-free (not assessable income) Assessable income and taxed at 15% to $1.1M and then taxed at 45% on balance over $1.1M

Death benefit

Dependant

 Tax-free (not assessable income) Tax-free (not assessable income)

Non-dependant

 Assessable income and taxed at 15% Assessable income and taxed at 30%
 

Medicare levy of 1.5% is added where tax is payable.

Previously paid post 83 components count towards the low rate threshold of $150,000.

Thresholds of $150,000 and $1,100,000 (for the financial year 2009-2010) are indexed to AWOTE at $5,000 intervals.

Dependant for this purpose is a spouse, former spouse, a child under age 18, a person in an interdependency relationship, or was a dependant of the deceased.