Super for beginners, part 16: Tax-free twice

Q: I am confused. When I retire and I am over 60 I receive tax-free super benefits. Someone has told me that I also get other tax-free stuff. Can you tell me what that is?

In terms of retirement and superannuation, when you reach 60 and start a retirement income stream (super pension) you get two dollops of tax-free super.

If you’re aged 60 years or over, any lump sum or income stream benefits you receive from a ‘taxed’ super fund (90% of all super benefits are from this type of super fund) are tax-free. Secondly, fund earnings on assets in pension phase are exempt from tax – taking an income stream from a super fund means no tax on fund earnings.

In contrast, earnings on assets in accumulation phase are subject to up to 15% earnings tax.

If you choose not to draw a pension from your fund and leave your super benefit in accumulation phase indefinitely, then the 15% earning tax applies.

If you choose to take your super out of the super system when you retire then the earnings on those savings that you invest outside super will be subject to your marginal income tax rate (although many Australians aged 65 years or over pay very little tax due to the Senior Australians and Pensioners Tax Offset).

See other SuperGuide articles for more information on tax and super, and SAPTO.