An AustralianSuper Pension can be a tax-effective way to fund your retirement
The way your pension income is taxed depends on your age.
||Tax on pension payments
||Tax on lump sums
||Taxed at your income tax rate, plus Medicare levy^, less the 15% tax offset*
||First $175,000 is tax-free†; balance at 16.5% (taxable component)
Tax-free (tax-free component)
||Taxed at your income tax rate, plus Medicare levy^
||Taxed at 21.5% (taxable component)
Tax-free (tax-free component)
Tax rules for members aged 60 and over
Once you reach age 60, you pay no tax on your pension, whether you receive regular income payments or withdraw any lump sum amounts. You don’t have to declare your pension as assessable income when you lodge a tax return.
Tax rules for members aged 55-59
Your pension payments will be subject to income tax. However, some of your pension payment may be tax-free and you will receive a 15% tax offset on the taxable portion of your payments.
The taxable portions are:
- Before-tax contributions, including employer super payments and salary sacrifice amounts
- After-tax contributions where you’ve claimed a tax deduction
- Investment earnings
The tax free portions are:
- Any after-tax contributions you’ve made
- Any Government co-contribution amounts
- Your pre-July 1983 benefits, calculated at 30 June 2007
- Any Capital Gains Tax exempt component
See the tax section of the Pension Member Guide for a worksheet on calculating your total tax payable.
Tax rules for members under 55
If you’re under 55, your pension payments are subject to income tax and you’re not eligible for the 15% tax offset.
If the pension account was established using proceeds from a death benefit received from a super fund, pension payments are taxed on the same basis as pension payments paid to members between 55-59 years.
Investment earnings and tax
You pay no tax on the investment earnings in your AustralianSuper Pension – regardless of your age.
You may be able to claim a tax offset of 15% on the assessable portion of your annual pension payment which is your pension payment less the tax-free amount. This offset is available if you’re:
- 55 or over (but under 60)
- Receiving a pension due to disability
- Receiving a pension due to the death of another person
Any tax you need to pay will be taken from your pension payment before it’s deposited into your bank account in the same way tax comes out of a working wage. The tax taken from your pension payments is based on a number of factors such as whether you’ll claim the tax-free threshold of $18,200 and whether you’re eligible for the 15% tax offset.
AustralianSuper will work out any tax you need to pay, deduct it and pay it to the Australian Taxation Office.
^ From 1 July 2014, the Medicare Levy will increase from 1.5% to 2%.
* Please note some of your pension payments may be tax free (see below for detail). This tax rate also applies to pension payments from a pension account set up using the proceeds from a death benefit.
† This is a lifetime limit and is indexed.