Key factors that affect how your super payout is taxed
Key factors that affect how your super payout is taxed
The recent changes to super may affect your super payout. The main change is that super payouts - or benefits - are now taxed differently and in some cases will not be taxed at all.
To work out how your payout will be taxed, you need to know:
- the part of your payout that is taxable - the taxable component
- the age you'll be when you receive the payout
- how your payout is paid - as a lump sum, pension or a combination of both.
Components of a super payout
|
Different tax treatments apply to super payments made to former temporary residents. Since 1 April 2009, retiring or attaining age 65 has ceased to be a condition of release of super benefits for former temporary residents (not including holders of visa subclasses 405 and 410). For more information, refer to Superannuation information for temporary residents departing Australia.
|
Components of a super payout
From 1 July 2007, super payouts will be made up of two components - a tax-free and a taxable component.
A tax-free component is the part of a benefit that is tax-free and does not count towards your assessable (or taxable) income.
A taxable component is the part of the benefit that is taxable. It may include two parts - one where tax has been paid and one where tax has not yet been paid. These are called taxed and untaxed elements respectively.
To work out how your super payout is taxed, you only need to understand how the taxed and untaxed elements of the taxable component are taxed. The tax-free component is not taxable.
- A taxed element is the super that has already had tax paid on it in the fund. It may or may not need to have additional tax paid on it once it is paid out. You may still need to include the taxed element in your tax return.
- An untaxed element is the part of your payout that hasn't had any tax paid on it in the fund, but which is still taxable. It must be included in your tax return as assessable income.
How do I know if my payout has taxed or untaxed elements?
Before you can work out how your payout is taxed, you need to know what age you'll be when you receive your payout and the type of payout you'll receive.
Work out at what age you'll take your payout
Work out at what age you'll take your payout
Before you can calculate how much tax you'll pay on your payout, you need to know how old you'll be when you receive it.
You need to know if you'll be paid out:
- before you've reached your preservation age
- between the preservation age and 60 years
- when you're 60 or over.
The preservation age is the age you can normally access your benefits and it depends on your date of birth.
Date of birth
|
Preservation age
|
Before 1 July 1960
|
55
|
1 July 1960 to 30 June 1961
|
56
|
1 July 1961 to 30 June 1962
|
57
|
1 July 1962 to 30 June 1963
|
58
|
1 July 1963 to 30 June 1964
|
59
|
After 30 June 1964
|
60
|
Once you've worked out when you'll receive your payout, all you need to know is the type of payout you'll receive - a lump sum, pension, or combination of the two.
How do I know if my payout has taxed or untaxed elements?
Most super payouts are taxed. Sometimes they include an untaxed element. Your fund can tell you if your payout will include an untaxed element as well as a taxed element.
Certain public sector funds or schemes, such as government funds for public servants, are more likely to pay benefits with an untaxed element because generally these funds are not subject to tax.
To find out if your super fund or scheme is subject to tax, check this list of untaxed funds. If you're still unsure, ask your fund.
When you receive your payout, your super fund will send you a payment summary which will show:
- the components of the benefit, including any untaxed and taxed elements
- the tax withheld
- any tax offset you may be able to claim.
How the untaxed element of your super payout is taxed
How the taxed element of your super payout is taxed
How the untaxed element of your payout is taxed
The untaxed element is the part of your benefit which hasn't been taxed in the fund, but which is still taxable. Because it's taxable, you may need to pay tax on it.
The type of payout you'll receive, combined with the age you'll be when taking your payout, will determine the tax you pay on the untaxed element of your payout.
I'm under my preservation age and will receive a lump sum (untaxed element)
How will the untaxed element of my lump sum super benefit be taxed?
If you:
- are below your preservation age, and
- receive a lump sum super benefit that includes or consists entirely of an untaxed element
the untaxed element or amount is:
- assessable income
- subject to your marginal tax rates.
You will pay:
- no more than 30% tax (plus Medicare levy) on amounts up to the untaxed plan cap amount
- the highest marginal tax rate (plus Medicare levy) for any amount over the untaxed plan cap amount.
|
In 2011-12, the flood levy may apply to this payment where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
You will receive:
- a tax offset to ensure that the rate of tax payable is no more than 30% (plus Medicare levy) for untaxed elements up to the untaxed plan cap amount.
You are entitled to:
- a separate untaxed plan cap for each plan from which you receive lump sum super benefits. However, the cap is reduced by the untaxed element of each benefit you receive from the same payer.
Example 1
Emma is 54 and receives a lump sum on 1 September 2011 of $280,000. Her super fund tells her the amount consists entirely of an untaxed element - which means the whole amount is taxable and hasn't had tax paid on it yet.
Emma will include $280,000 in her assessable income and pay the following tax:
|
Untaxed element: $280,000
|
no more than 30% tax (plus Medicare levy)
|
|
In 2011-12 , the flood levy may apply to this payment where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm under my preservation age and will be paid a pension or income stream (untaxed element)
How will the untaxed element of my super income stream be taxed?
If you:
- are below your preservation age, and
- receive a super income stream (such as a pension or annuity) that includes or consists entirely of an untaxed element
the untaxed element or amount is:
- assessable income
- subject to your marginal tax rates (plus Medicare levy).
You will pay tax at your marginal tax rate (plus Medicare levy).
This includes super income streams that started before 1 July 2007.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
Example 2
Simon is 51 and receives a super pension of $24,000 starting on 1 July 2011. The amount completely consists of an element untaxed in the fund - which means the whole pension is taxable and hasn't had tax paid on it yet.
Simon will include $24,000 in his assessable income and pay the following tax:
|
Untaxed element: $24,000
|
taxed at marginal rates (plus Medicare levy), with no tax offset
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm between my preservation age and 60 and will be paid a lump sum (untaxed element)
How will the untaxed element of my lump sum super benefit be taxed?
If you:
- are between your preservation age and 60, and
- receive a lump sum super benefit that includes or consists entirely of an untaxed element
The untaxed element or amount is:
- included in your assessable income
- subject to different rates of tax (plus Medicare levy).
You will pay:
- no more than 15% tax (plus Medicare levy) on amounts up to the low rate cap amount
- a maximum of 30% tax (plus Medicare levy) on amounts over the low rate cap amount and up to the untaxed plan cap amount for each super plan
- the highest marginal tax rate (plus Medicare levy) for any amount above the untaxed plan cap amount.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
You will receive:
- a tax offset to ensure that the rate of tax payable is no more than 15% (plus Medicare levy) for untaxed elements up to the low rate cap amount
- a tax offset to ensure that the rate of tax payable is no more than 30% (plus Medicare levy) for untaxed elements over the low rate cap amount and up to the untaxed plan cap amount.
You are entitled to a separate untaxed plan cap for each plan from which you receive lump sum super benefits. However, the cap is reduced by the untaxed element of each benefit you receive from the same payer.
|
The low rate cap is a lifetime cap which is reduced by any other taxed or untaxed elements you receive from any super payer after you have reached your preservation age (but not below zero).
|
|
The low rate cap and untaxed plan cap amounts are indexed annually in accordance with average weekly ordinary time earnings. For the annual low rate cap and untaxed plan cap amounts, refer to Key superannuation rates and thresholds.
|
Example 1
Louise is 59 years of age. She receives a lump sum benefit on 1 September 2011 of $380,000. Her super fund tells her that this amount completely consists of an element untaxed in the fund - which means the whole amount is taxable and hasn't had tax paid on it yet. Louise has not previously received a super lump sum.
Louise will include $380,000 in her assessable income and pay the following tax:
|
Untaxed element up to the low rate cap amount
(The low rate cap amount for 2011-12 is $165,000)
|
no more than 15% tax (plus Medicare levy)
|
Untaxed element remainder of $215,000
|
no more than 30% tax (plus Medicare levy)
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm between my preservation age and 60 and will be paid a pension or income stream (untaxed element)
How will the untaxed element of my super income stream be taxed?
If you:
- are under 60 years old but have reached your preservation age, and
- receive a super income stream (a pension or annuity) that includes or consists entirely of an untaxed element
the untaxed element or amount is:
- included in your assessable income
- subject to your marginal tax rates (plus Medicare levy).
You will pay tax at your marginal tax rate (plus Medicare levy).
This includes super income streams that started before 1 July 2007.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
Example 2
Jack is 55 years of age. He receives a super pension of $46,000 starting on 1 October 2011. The amount completely consists of an element untaxed in the fund - which means the whole pension is taxable and hasn't had tax paid on it yet.
Jack will include $46,000 in his assessable income and pay the following tax:
|
Untaxed element: $46,000
|
taxed at marginal rates (plus Medicare levy), with no tax offset
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm 60 or over and will be paid a lump sum (untaxed element)
How will the untaxed element of my super lump sum benefit be taxed?
If you:
- are 60 years old or over, and
- receive a lump sum super benefit that includes or consists entirely of an untaxed element
the untaxed element or amount is:
- included in your assessable income
- subject to your marginal tax rates (plus Medicare levy).
You will pay:
- no more than 15% tax (plus Medicare levy) on any amount up to the untaxed plan cap amount
- the highest marginal tax rate (plus Medicare levy) for any amount over the untaxed plan cap amount.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
You will receive a tax offset to ensure that the rate of tax payable is no more than 15% (plus Medicare levy) for untaxed elements up to the untaxed plan cap amount.
You are entitled to a separate untaxed plan cap for each plan from which you receive super lump sum benefits. However, the cap is reduced by the untaxed element of each benefit you receive from the same payer.
|
The untaxed plan cap amount for 2011-12 is $1,205,000. It is indexed annually according to average weekly ordinary time earnings. For untaxed plan cap amounts refer to Key superannuation rates and thresholds.
|
Example 1
John is a public servant and receives a super lump sum on 1 August 2011 of $500,000 at age 60. His super fund tells him that this amount includes an untaxed element of $350,000, a taxed element of $100,000 and a tax-free component of $50,000.
John will include the $350,000 untaxed element in his assessable income and pay the following tax:
|
Tax-free component: $50,000
|
no tax
|
Taxed element: $100,000
|
no tax, as he is 60
|
Untaxed element: $350,000
|
no more than 15% tax (plus Medicare levy)
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm 60 or over and will be paid a pension or income stream (untaxed element)
How will the untaxed element of my super income stream be taxed?
If you:
- are 60 years old or over, and
- receive a super income stream (such as a pension or annuity) that includes or consists entirely of an untaxed element
the untaxed element or amount is:
- included in your assessable income
- subject to your marginal tax rates (plus Medicare levy).
You will pay tax at your marginal tax rate (plus Medicare levy).
You will receive a 10% tax offset on the untaxed element.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
This includes super income streams that started before 1 July 2007.
Example 2
Vanessa is 62 and receives a super pension of $56,000 starting on 1 July 2011. It consists entirely of an untaxed element - which means the whole amount is taxable and hasn't had tax paid on it yet.
Vanessa will include $56,000 in her assessable income and pay the following tax:
|
Untaxed element: $56,000
|
taxed at marginal rates (plus Medicare levy), with a 10% tax offset ($5,600)
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
How the taxed element of your payout is taxed
The taxed element is the part of your benefit which has had tax paid on it in the fund. It may or may not need to have additional tax paid on it once it is paid out. You must include the taxed element in your tax return.
The type of payout you'll receive, combined with the age you'll be when taking your payout, will determine the tax you pay on the taxed element of your payout - unless you are 60 or over.
If you're 60 or over, you pay no tax on the taxed element of your payout regardless of the type of payout it is. The untaxed element is still subject to tax (see How the untaxed element of your payout is taxed).
I'm under my preservation age and will receive a lump sum (taxed element)
How will the taxed element of my lump sum super benefit be taxed?
If you:
- are below your preservation age, and
- receive a lump sum super benefit that includes or consists entirely of a taxed element
the taxed element is:
- included in your assessable income
- subject to your marginal tax rates (plus Medicare levy).
- will pay no more than 20% tax (plus Medicare levy).
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
You will receive:
- a tax offset to ensure that the rate of tax payable is no more than 20% (plus Medicare levy).
|
If you receive a disability super benefit as a lump sum, your tax-free component is increased to broadly reflect the period where you would have expected to have been gainfully employed. The tax-free component of your benefit is always not assessable and not exempt income, that is, it is tax-free.
|
Example 1
Suzi is 50 and receives a lump sum super benefit of $110,000 on 17 October 2011. Her super fund tells her that this amount consists of a tax-free component of $10,000 and a taxable component made up entirely of a taxed element of $100,000.
Suzi will include the $100,000 taxed element in her assessable income and pay the following tax:
|
Tax-free component: $10,000
|
no tax
|
Taxed element: $100,000
|
no more than 20% tax (plus Medicare levy)
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm under my preservation age and will be paid a pension or income stream (taxed element)
How will the taxed element of my super income stream be taxed?
If you:
- are below your preservation age, and
- receive a super income stream (pension or annuity) that includes or consists entirely of a taxed element
the taxed element:
- is included in your assessable income
- subject to tax at your marginal tax rates (plus Medicare levy).
You pay:
- tax at your marginal rates (plus Medicare levy).
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
No tax offset generally applies unless the payout is a disability super benefit, in which case you are entitled to a tax offset equal to 15% of the taxed element.
This applies to the taxable component of any super income streams, including those started before 1 July 2007.
Example 2
George is 53 and receives his income stream super benefit as an annual payment of $18,000 on 30 July 2011. His super fund tells him that this amount completely consists of a taxed element.
George will include $18,000 taxed element in his assessable income and pay the following tax:
|
Taxed element: $18,000
|
taxed at marginal rates (plus Medicare levy), with no tax offset as George is under 55 and it is not a disability super benefit
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm between my preservation age and 60 and will be paid a lump sum (taxed element)
How will the taxed element of my lump sum super benefit be taxed?
If you:
- are between your preservation age and 60, and
- receive a lump sum super benefit that includes or consists entirely of a taxed element
the taxed element is:
- included in your assessable income (even if the amount received is below the low rate cap amount and no tax has been withheld)
- subject to tax at your marginal rates (plus Medicare levy).
You will pay:
- no tax on amounts up to the low rate cap amount
- no more than 15% tax (plus Medicare levy) on amounts over the low rate cap amount.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
You will receive:
- a tax offset to ensure that the rate of tax payable is no more than 0% for taxed elements up to the low rate cap amount
- a tax offset to ensure that the rate of tax payable is no more than 15% (plus Medicare levy) for taxed elements over the low rate cap amount.
|
The low rate cap is a lifetime cap which is reduced by any other taxed or untaxed elements you receive from any super payer after you have reached your preservation age (but not below zero).
The low rate cap amount is indexed annually in accordance with average weekly ordinary time earnings. For the annual low rate cap amounts refer to Key superannuation rates and thresholds.
|
|
If you receive a disability super benefit as a lump sum, your tax-free component is increased to broadly reflect the period where you would have expected to have been gainfully employed. The tax-free component of your benefit is always not assessable and not exempt income, that is, it is tax-free.
|
Example 1
Michael is 56 and receives for the first time a lump sum super benefit of $300,000 on 25 July 2011. His super fund tells him that this amount consists of a tax-free component of $100,000 and a taxable component of $200,000. The taxable component consists entirely of a taxed element.
Michael will include the $200,000 taxed element in his assessable income and pay the following tax:
|
Tax-free component: $100,000
|
no tax
|
Taxed element up to the low rate cap amount
(The low rate cap amount for 2011-12 is $165,000)
|
0% tax
|
Taxed element over the low rate cap amount - $35,000
|
no more than 15% tax (plus Medicare levy)
|
If Michael receives any further lump sum super benefit payments, he must reduce his low rate cap amount by the offset amount previously received, $165,000.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm between my preservation age and 60 and will be paid a pension or income stream (taxed element)
How will the taxed element of my super income stream be taxed?
If you:
- are under 60 but have reached your preservation age, and
- receive a super income stream (a pension or annuity) that includes or consists entirely of a taxed element
the taxed element is:
- included in your assessable income
- subject to tax at your marginal rates (plus Medicare levy).
You will pay tax at your marginal rates (plus Medicare levy).
You will receive a tax offset equal to 15% of this amount.
This tax offset will apply to the taxable component of any super income streams, including those started before 1 July 2007.
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
Example 2
Jenny is 55 and receives an income stream super benefit as an annual payment of $28,000 on 29 August 2011. Her super fund tells her that this amount consists entirely of a taxable component (which in turn consists entirely of a taxed element).
Jenny will include $28,000 taxed element in her assessable income and pay the following tax:
|
Taxed element: $28,000
|
taxed at marginal rates (plus Medicare levy), with a 15% tax offset ($4,200)
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How do I fill in my tax return?
I'm 60 or over and will be paid a lump sum (taxed element)
How will the taxed element of my super lump sum benefit be taxed?
If you:
- are 60 years old or over, and
- receive a lump sum super benefit that includes or consists entirely of a taxed element
- taxed element is not included in your assessable income.
- will pay no tax on the taxed element of your payout regardless of the type of payout you receive.
|
Your payout is not assessable income, nor is it exempt income.
This means that if you receive a lump sum payout that consists only of tax-free component and/or taxed element of the taxable component after 1 July 2007, you do not include the benefit in your personal income tax return and you do not pay any tax.
|
Example 1
Gail is 60 and receives a lump sum super benefit of $330,000 on 25 September 2011. The benefit consists of a taxed element of $130,000, an untaxed element of $155,000 and a tax-free component of $45,000.
Gail will include the $55,000 untaxed element in her assessable income and pay the following tax:
|
Tax-free component: $45,000
|
no tax
|
Taxed element: $130,000
|
no tax as Gail is 60
|
Untaxed element: $155,000
(The low rate cap amount for 2011-12 is $165,000)
|
no more than 15% tax (plus Medicare levy)
|
|
In 2011-12, the flood levy may apply to this payment, where an individual's taxable income exceeds $50,000. We have published information to help you work out if the flood levy applies to you.
|
How will the taxed element of my super income stream be taxed?
If you:
- are 60 years old or over, and
- receive a super income stream (such as a pension or annuity) that includes or consists entirely of a tax element
- taxed element is not included in your assessable income.
- will pay no tax on the taxed element of your payout regardless of the type of payout you receive.
|
Your payout is not assessable income, nor is it exempt income.
This means that if you receive a lump sum payout that consists only of tax-free component and/or taxed element of the taxable component after 1 July 2007, you do not include the benefit in your personal income tax return and you do not pay any tax.
|
This applies to any super income streams, including those started before 1 July 2007.
Example 1
John is 60 and receives a super income stream benefit of $73,000 after 1 July 2007. His super fund tells him that this amount consists of a $73,000 income stream payment. The benefit consists entirely of a taxed element.
John is 60 years old so will not include any of the income stream benefit in his assessable income.
|
Taxed element: $73,000
|
no tax, as he is 60
|
The taxable component may be made up of a taxed element entirely, an untaxed element entirely, or a combination of a taxed and an untaxed element
If the taxable component of your payout includes both taxed and untaxed elements, each element will be taxed separately, according to different rules. To find out how, go to the relevant explanation that fits your situation for each element.
For example, if you're between your preservation age and under 60 and are being paid a lump sum, you'd look at:
I'm between my preservation age and 60 and will be paid a lump sum (taxed element), and
I'm between my preservation age and 60 and will be paid a lump sum super benefit (untaxed element)
Your super fund will send you a payment summary, which will show the breakdown of your payment. Include each part of your payment in your tax return.
How do I fill in my tax return?
Your payout may consist of a lump sum and income stream, each of which may be a mix of untaxed and taxed elements.
To find out how such a payout would be taxed, go to the relevant explanation that fits your situation for each element (taxed or untaxed) and for each type of payout.
For example, if you're between your preservation age and are under 60, you'd look at each of the following:
I'm between my preservation age and 60 and will be paid a lump sum (taxed element)
I'm between my preservation age and 60 and will be paid a lump sum super benefit (untaxed element)
I'm between my preservation age and 60 and will be paid a pension or income stream (untaxed element)
I'm between my preservation age and 60 and will be paid a pension or income stream (taxed element)
Your super fund will send you a payment summary which will show the breakdown of your payment. Include each part of your payment in your tax return.
How do I fill in my tax return?
How do I fill in my tax return?
You must include in your personal income tax return:
- the amount of the untaxed element as part of your assessable income
- the amount of taxed element as part of your assessable income.
Your super fund will send you a payment summary which will show the components of the benefit, the tax withheld and any tax offset you may be able to claim. If you are claiming a tax offset, include it in the offset section of your income tax return.
If you receive an income stream, that is, a pension or annuity, your super fund will send you a PAYG payment summary - superannuation income stream (NAT 70987, PDF, 153KB).
If you receive a lump sum payment, your super fund will send you a PAYG payment summary - superannuation lump sum (NAT 70947, PDF, 149KB).
If you are 60 or over
If you're 60 or over and your benefit consists entirely of:
- a tax-free component, and/or
- a taxed element (of the taxable component)
you do not include it in your personal income tax return and you do not pay any tax on your benefit. This is the case for both lump sum and income stream payouts.
If you receive a benefit that consists of an untaxed element (of the taxable component) you must include it in your tax return. If the benefit is an income stream, you must also include any tax offset you are entitled to in your tax return. If the benefit is a lump sum, the ATO will calculate any tax offset you are entitled to.
Last Modified: Friday, 28 September 2012
|