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Superannuation lump sums and income for MLS

Last updated 23 September 2020

Your income and your combined income for MLS purposes exclude the taxed element of a superannuation lump sum, other than a death benefit:

  • that you received when you were aged from your preservation age to under 60 years old
  • that does not exceed your low-rate cap amount for 2018–19.

For 2018–19 the low-rate cap amount is $205,000, but it could be less for you if you received certain superannuation lump sums in previous years. For more information, see table 1 below and the definition of Low-rate cap.

Table 1: Death benefit

Death benefit paid to death benefits dependant (of any age)

Element

Amount

Tax rate

Tax free component

Whole

Tax free

Taxed element

Whole

Tax free

Untaxed element

Whole

Tax free

Death benefit paid to non-death benefits dependant (of any age)

Element

Amount

Tax rate

Tax free component

Whole

Tax free

Taxed element

Whole

15%

Untaxed element

Whole

30%

Low-rate cap amount for taxable components of superannuation lump sum payments

This concession applies only to superannuation lump sums paid to you when you have reached your preservation age but before you turn 60 years old.

The low-rate cap amount is the maximum amount of taxable components (taxed and untaxed elements) that can be taxed at a concessional lower rate.

For 2018–19, the low-rate cap amount is a maximum of $205,000, but it could be less for you if before July 2018 you received any superannuation lump sums that counted towards your entitlement to a superannuation lump sum tax offset. The amount is indexed to average weekly ordinary time earnings and rounded down to the nearest multiple of $5,000. See Key superannuation rates and thresholds.

The low-rate cap amount is a 'lifetime' limit. This means that the taxed element and untaxed elements of all superannuation lump sum payments that you receive (as well as the amount of any eligible termination payments for which you became entitled to a rebate before 1 July 2007) when you have reached your preservation age but before you turn 60 years old will be taxed at a concessional rate until your total reaches the low-rate cap amount ($205,000 plus future indexed increases). Payments you receive in excess of the low-rate cap amount will be taxed at the tax rate shown in Table 2 below.

Consequently, for 2018–19 the maximum amount for which you can be taxed at a concessional rate is $205,000 less any amounts to which the concessional tax rate has previously been applied.

For more information on how we work out your low-rate cap amount, see How tax applies to your super.

Table 2: Superannuation lump sum (other than death benefit)

Under the preservation age at the time of payment

Element

Amount

Tax rate

Tax free component

Whole

Tax free

Taxed element

Whole

20%

Untaxed element

Up to the untaxed-plan cap amount, $1,480,000 (see Note 2)

30%

Untaxed element

Over the untaxed-plan cap amount, $1,480,000 (see Note 2)

45%

Preservation age to 59 years of age at the time of payment

Element

Amount

Tax rate

Tax free component

Whole

Tax free

Taxed element

Up to the low rate cap amount, $205,000 (see Note 3)

Tax free

Taxed element

Over the low rate cap amount, $205,000 (see Note 3)

15%

Untaxed element

Up to the low rate cap amount, $205,000 (see Note 3)

15%

Untaxed element

Over the low rate cap amount, $205,000 (see Note 3) and up to the untaxed-plan cap amount, $1,480,000 (see Note 2)

30%

Untaxed element

Over the untaxed-plan cap amount, $1,480,000 (see Note 2)

45%

60 years of age or older at the time of payment

Element

Amount

Tax rate

Tax free component

Whole

Tax free

Taxed element

Whole

Tax free

Untaxed element

Up to the untaxed-plan cap amount, $1,480,000 (See Note 2)

15%

Untaxed element

Over the untaxed-plan cap amount, $1,480,000 (see Note 2)

45%

Note 2: For 2018–19, the untaxed-plan cap amount is a maximum of $1.480 million, but it could be less for you if you have previously received another superannuation lump sum with an untaxed element from the same superannuation fund. For more information on how we work out your untaxed-plan cap amount, see How tax applies to your super.

Note 3: For 2018–19, the low-rate cap amount is a maximum of $205,000, but it could be less if you received any superannuation lump sums in a prior income year that counted towards your entitlement to a superannuation lump sum tax offset or, if before July 2007, you received an eligible termination payment after your 55th birthday. For more information on how we work out your low-rate cap amount, see How tax applies to your super.

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