If you receive one or more super lump sum benefits in a year, your low rate cap is firstly reduced by the amount of the taxed element and any of the low rate cap that remains is then applied to the untaxed element.
Example
Louise is 59. On 1 September 2007, she receives a super lump sum of $680,000, her first super payment since reaching the age of 55 (her preservation age). The super fund provides her with a statement that shows the amount consists wholly of a taxable component with:
- a taxed element of $380,000, and
- an untaxed element of $300,000.
For the 2007-08 income year, Louise's low rate cap will be $140,000. She is entitled to a tax offset for the taxed element, to reduce the amount of tax to nil on the first $140,000 of the taxed element. An offset will be applied to the remaining $240,000 to reduce the tax rate to 15% (plus Medicare levy)
Since the amount of the taxed element is greater than her low rate cap the amount of low rate cap available to her is now $0 (the low rate cap of $140,000 less the first $140,000 of the taxed element). Therefore, none of the untaxed element is within the low rate cap. The low rate cap can not be reduced below zero.
Therefore the tax rates on Louise's lump sum of $680,000 will be:
Taxed element
- $140,000 - 0% tax
- $240,000 - 15% tax + Medicare levy.
Untaxed element
- $300,000 - 30% tax + Medicare levy.
Last Modified: Thursday, 4 September 2008