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) in retirement phase, you get two dollops of tax-free super.
If you’re aged 60 years or over, any lump sum or super pension benefit payments (from a retirement phase pension) 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 retirement phase are exempt from tax – taking a retirement phase 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 retirement phase 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 who have reached Age Pension age pay very little tax due to the Senior Australians and Pensioners Tax Offset). For information on your Age Pension age see SuperGuide article Age Pension age increasing to 67 years (not 70 years).
Note: Since 1 July 2017, the federal government has introduced a $1.6 million cap on the amount of superannuation that can be transferred into retirement phase. For more information on the $1.6 million transfer balance pension cap, see SuperGuide article Retirement phase: A super guide to the $1.6 million transfer balance cap.
For more information on tax and super, and also SAPTO (tax offset for eligible Senior Australians), see the following SuperGuide articles: