Super is a great way to save money for your retirement. It is generally taxed at a lower rate than your regular income. You typically pay 15% tax on your super contributions, and your withdrawals are tax-free if you're 60 or older.
When you turn 60, your pension payments (or any lump sum withdrawals) are usually tax free. All lump sums and pension payments are tax-free after age 60.
Lump Sum withdrawals when aged over 65
You can make Lump Sum withdrawals whenever you like from your SMSF once you turn 65. There is no maximum Lump Sum amount if you are aged over 65 and you are free to access all your Super Benefit as desired. No tax is payable on Lump Sum withdrawals made after 65.
Tax on withdrawals of taxable component
Your marginal tax rate or 32%, whichever is lower – unless the sum of the untaxed elements of all super lump sum benefits received under the super plan exceeds the untaxed plan cap. Amounts above the cap will be taxed at the top marginal rate.
Pension payments are tax-free after age 60: Any super benefits, either pension or lump sum, paid to you after age 60 are tax-free.
Tax returns for Age Pension recipients
If you receive the Age Pension (either full or part) and received income from other sources and Centrelink is withholding tax from your pension payments, it is compulsory to lodge a tax return each year.
If you are over age 60, any benefits paid to you (as a lump sum or, if applicable, as a pension) are tax-free and not assessable for income tax purposes. If you are under age 60, all benefits are subject to Commonwealth benefits or income tax.
If you are under age 60, you may be required to pay lump sum withdrawal tax, depending on the amount you withdraw and your superannuation tax components. The Low Rate Cap amount actually allows you to receive up to $230,000 of the taxable component tax-free. This is a lifetime (i.e. not annual) indexed cap.
Personal super contributions
You don't pay any contributions tax on non-concessional contributions. If you claim a tax deduction for personal super contributions, they become part of your concessional contributions. You may be able to claim a tax deduction on any personal super contributions you make until you turn 75.
Tax on Super Withdrawals Over 60
In most cases, you will be able to withdraw your super tax free as either a lump sum, or income stream if you are over 60 – whether your super is in accumulation phase or pension phase.
WILL ACCESSING MY SUPER AFFECT MY CENTRELINK PAYMENT? If you withdraw money from your super fund, you must tell Centrelink within 14 days. Money withdrawn from super is not treated as income for a person receiving a social security payment.
Taking money out of superannuation doesn't affect payments from us. But what you do with the money may. For instance we'll count it in your income and assets tests if you either: use it to buy an income stream.
Assume, for example, you will need 65 per cent of your pre-retirement income, so if you earn $50,000 now, you might need $32,500 in retirement.
You can withdraw your super if you're. 65 years or over, whether you keep working or not. 60 or over and change employers or temporarily stop working. Under 60 and have permanently stopped working, and you've met your preservation age.
If you contribute too much to your super, you may have to pay extra tax. If you exceed the before-tax (concessional) super contributions cap, the excess is included in your income tax return and taxed at your marginal tax rate. You can choose to withdraw some of the excess contributions to pay the additional tax.
Tax on Super Withdrawals
If you make a lump sum withdrawal from super while under age 60, but over your preservation age, the withdrawal can be received tax free up to the lifetime low rate cap, plus any tax-free component portion of the withdrawal.
When you retire you could withdraw your super as a cash payment from your super account. You can open an account-based pension and set-up regular income payments. You can also withdraw smaller cash payments from your super account or account-based pension. The choice is yours.
In most cases, the lump-sum option is clearly the way to go. The main difference between a lump-sum and a monthly payment is that with a lump-sum option, you get to have control over how your money is invested and what happens to it once you're gone. If that's the case, then the lump-sum option is your best bet.
If you're 60 and over, the income will generally be tax-free. If you're between your preservation age and 59, the components of your super will dictate how it will be taxed.
If you make $70,000 a year living in Australia, you will be taxed $14,617. That means that your net pay will be $55,383 per year, or $4,615 per month. Your average tax rate is 20.9% and your marginal tax rate is 34.5%.
Taxable income is your gross income, less any allowable deductions. When you update your income estimate you need to include all the income you and/or your partner expect to receive for the full financial year including: salary and wages. lump sum payments.
The disadvantages of early access to super
Getting money from you super may result in you: paying more tax. paying more child support. getting lower Centrelink payments.