When you become eligible to access your super you can take a super income stream to provide you with a regular income, or you can withdraw all or part of your benefit as a lump sum.
Super income streams are also known as pensions (which have no set time period) or annuities (which are fixed for a specific time period). They are made up of two components, taxable and tax-free.
The taxable component is made up of:
The tax-free component is made up of:
Benefits from a taxed super fund (i.e. most super funds) are tax-free.
No tax is payable on the tax-free component of your income payment. The taxed component however is added to your taxable income and taxed at your marginal tax rate, less a tax offset equal to 15% of the taxable portion of the payment.
If you are aged 60 or over any withdrawals from a taxed super fund are generally tax-free.
Speak to a financial adviser to find out the best way to take your super since taking all of your super on retirement as a lump sum may not be a good idea.
If you take a lump sum and you are aged between 55 and 60, you can withdraw up to the low rate threshold, currently $185,000, tax-free. This is a lifetime limit and is indexed annually. The threshold does not include the tax-free portion of your super account, which will be returned to you tax-free. Any amounts over the low rate threshold will be taxed at 15% (plus the Medicare levy).
If you are withdrawing a lump sum from super and are younger than age 55 (which is only possible in very limited circumstances), the lump sum will be taxed at 20% (plus the Medicare Levy).
In most cases, when a person dies, their super fund will pay their remaining super to the person they have chosen as their nominated beneficiary. Super paid after a person's death is called a 'super death benefit'.
The tax on a super death benefit depends on:
A dependent of the deceased includes:
If you’d like to know how your particular situation is impacted by the tax law, seek out professional advice, either from a tax adviser like H&R Block or from your financial planning specialist.
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