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This concession applies only to superannuation lump sums paid to you when you are 55 to 59 years old, that is, when you have reached your preservation age (55 years old) but before you turn 60 years old.
The low-rate cap is the maximum amount of taxable components (taxed and untaxed elements) that can be taxed at a concessional lower rate.
For 2011-12, the low-rate cap is $165,000, but it could be less for you if before July 2011 you received a superannuation lump sum after your 55th birthday. The cap is indexed to average weekly ordinary time earnings (AWOTE) and rounded down to the nearest multiple of $5,000. See Key superannuation rates and thresholds.
The low-rate cap 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 are 55 to 59 years old will be taxed at a concessional rate until their total reaches the low-rate cap amount ($165,000 plus future indexed increases). Payments you receive in excess of the low-rate cap will be taxed at the tax rate shown in table 1.
Consequently, for 2011-12 the maximum amount for which you can be taxed at a concessional rate is $165,000 less any amount to which the concessional tax rate has previously been applied.
For more information on how we work out the amount of your low-rate cap see Low rate cap on super lump sum benefits.