- 1. When can I access my super benefits?
- 2. What is my preservation age?
- 3. I don’t want to retire, but I want my super benefits
- 4. Do I have any pre-1999 super benefits?
- 5. What is the low-rate cap threshold?
- 6. How does the low-rate cap interact with taxable income?
- 7. How will my super lump sum be identified by the ATO?
- 8. Can you provide an example?
- 9. Where can I get more information?
Q: I have tried to phone the ATO re this query. Could you tell me the answer to this question? I turn 58 soon and I am eligible for a super payout of $201,000 next month of which only the $1000 is taxable at 17.0%. However, I still intend to keep working at my $58,000 a year job and wondered how this will affect the tax payable on my super.
We are an information site rather than an advisory site, and any tax questions need to be confirmed with a registered tax agent, such as accountant. Even so, we can offer you some general comments on the questions that you ask.
Questions and answers 1 to 4 below relate to accessing super and preservation age, while Questions and answers Facts 5 to 9 specifically deal with tax on super benefits, including the low-rate cap amount you refer to in your question.
1. When can I access my super benefits?
In normal circumstances, an individual can only access super benefits if they reach their preservation age AND retire (or satisfy another condition of release, such as starting a transition-to-retirement pension). (For more information on conditions of release, see SuperGuide articles When can I access my super? All conditions of release explained and Can I access my super and still work?).
2. What is my preservation age?
Anyone born before July 1960 has a preservation age of 55 years. Anyone born after June 1964 has a preservation age of 60 years. If you’re born between those timeframes then consider the following scenarios:
- Anyone born on or after 1 July 1960 has a preservation age of at least 56 years
- Anyone born on or after 1 July 1961 has a preservation age of at least 57 years
- Anyone born on or after 1 July 1962 has a preservation age of at least 58 years.
- Anyone born on or after 1 July 1963 has a preservation age of at least 59 years.
Expressing the rules in another way, if you turn 55 on or after 1 July 2018, then your preservation age is at least 59 years. For more information on preservation age see SuperGuide articles What age can I access my super (Preservation Age)? and What age can I access my super (Preservation Age)? and Retirement Age Reckoner: Discover your preservation age and Age Pension age .
3. I don’t want to retire, but I want my super benefits
If a person doesn’t want to retire to access super benefits (which assumes the person has also reached preservation age), then they must satisfy another condition of release to access super benefits. For more information, see SuperGuide articles When can I access my super? All conditions of release explained , and Guide to transition to retirement pensions (TTRs or TRISs) and Accessing super: Ceasing employment after 60
4. Do I have any pre-1999 super benefits?
If your super benefits are classified as ‘unrestricted non-preserved’, then it is possible to access such super benefits at any time. Some individuals who have been super fund members before 1999 may have some benefits that fall into this ‘unrestricted non-preserved’ category. For more information, see SuperGuide article What are unrestricted and restricted non-preserved super benefits?.
5. What is the low-rate cap threshold?
Note that the superannuation low-rate cap for lump sum superannuation payments is $200,000 for the 2017/2018 year, and $205,000 for the 2018/2019 year. If an individual is under the age of 60 but has reached their preservation age, then the taxable component of any lump sum benefits under this low-rate cap is not subject to tax.
Note: The low-rate cap is a lifetime cap, rather than a new cap for the taxable component of each specific lump sum payment. The tax-free component of a super benefit is always tax-free on payment, regardless of age. (For your reference, the low-rate cap previous financial years was $195,000 for the 2016/2017 year, $195,000 for the 2015/2016, $185,00 for the 2014/2015 year, $180,000 for the 2013/2014 year, and $175,000 for the 2012/2013 year.)
6. How does the low-rate cap interact with taxable income?
The tax payable on lump sum super benefits is fixed but the super benefit still forms part of an individual’s assessable income. The ATO uses tax offsets to ensure the tax payable on the super benefits is no more than the fixed benefit tax rate. For example, effective tax rate of 0% for the taxable component of lump sum benefit payments up to $200,000 (for the 2017/2018 year), or $205,000 (for the 2018/2019 year) and then the balance of the taxable component of the lump sum benefit is taxed at 15.0% (plus Medicare levy).
Note: The one exception to the general explanation above is where you receive benefits from certain public sector funds and then the first 200,000 (for the 2017/2018 year) or $205,000 (for the 2018/2019 year) of taxable component is taxed at 15.0% (plus Medicare levy), and then the amount above $200,000 (or $205,000) but below $1.455 million is taxed at 30.0% (plus Medicare levy) and the balance above $1.455 million is taxed at the highest marginal tax rate plus Medicare levy (47%), for the 2017/2018 year. For more information on tax rates applicable to super lump sums from an untaxed source, see SuperGuide article Tax-free super for over-60s, except for some .
7. How will my super lump sum be identified by the ATO?
Before the ATO revamped its website, the ATO explained how your lump sum will be treated for tax purposes. The extract, which no longer appears on the ATO website but is a useful summary is set out below. SuperGuide has updated the thresholds for the 2017/2018 and 2018/2019 years.
How will the taxed element of my lump sum super benefit be taxed?
- are between your preservation age and 60, and
- receive a lump sum super benefit that includes or consists entirely of a taxed element
The taxed element is:
- included in your assessable income, and
- subject to tax at your marginal rates (plus Medicare levy).
You will receive tax offsets to ensure that:
- the rate of tax is 0% on any amount that comes within the low rate cap ($200,000 for the 2017/2018 income year, or $205,000 for the 2018/2019 income year), and
- you pay no more than 15% tax (plus Medicare levy) on any amount above the low rate cap in an income year.
The low rate cap amount for 2017/2018 year is $200,000, and for the 2018/2019 year is $205,000. It is indexed annually in accordance with average weekly ordinary time earnings. For the annual low rate cap amounts [and other thresholds, see SuperGuide article Superannuation rates and thresholds for 2018/2019 year (and earlier years)].
If you receive one or more lump sum super benefits in an income year, you need to reduce your low rate cap amount (but not below zero) for the next income year by the total of the amounts:
- that are included in your assessable income for the first year (that is, the total taxable component of those lump sums), and
- for which you received a tax offset for the first year.
If you receive a disability superannuation benefit as a lump sum, your tax-free component is increased to broadly reflect the period where you would have expected to have been gainfully employed. The tax-free component of your benefit is always not assessable and not exempt income, that is, it is tax-free.
8. Can you provide an example?
The example below illustrates how a super payout can affect the tax payable on other income.
Michael is 59 and receives for the first time a lump sum super benefit of $310,000 on 25 July 2018. His super fund tells him that this amount consists of a tax-free component of $100,000 and a taxable component of $210,000. The taxable component consists entirely of a taxed element. Michael will pay no tax on the tax-free component of $100,000. He will include the taxable component of $210,000 in his personal income tax return as part of his assessable income, which will push him into a higher marginal tax rate bracket for his non-super income. This amount will be subject to his marginal tax rate (plus Medicare levy). However he will receive tax offsets to ensure that he pays no tax on $205,000 (the low rate cap amount for the 2018/2019 year) of the super lump sum payment and 15% tax (plus 2% Medicare levy) on the remaining $5,000.
9. Where can I get more information?
Again, we are an information site and I recommend that you chat to an accountant about your tax position. For more information on taking super benefits before the age of 60 see the following SuperGuide articles: