Pension
FACTSHEET 1 NOVEMBER 2016
Tax and account based pensions
The information in this document forms part of the Australian Catholic Superannuation and Retirement Fund Retirement Product Disclosure Statement dated 1 November 2016.
If you would like a hard copy, you can print this fact sheet directly from the website or you can contact us on 1300 658 776 and we will send you a copy at no cost.
This fact sheet provides general taxation information for a typical member
of Australian Catholic Superannuation. It does not take your personal
circumstances into account and you should seek professional advice if
necessary. The information is based on current tax legislation, which may
change. If there is a significant change, we will update this fact sheet.
Tax benefits of an account based pension
Account based pensions receive favourable tax treatment, including:
• Tax-free lump sum and pension payments from age 60;
• Reduced tax on pension payments if you are under age 60;
• No tax on investment earnings.
When you start your account based pension
If you transfer (roll over) money from another Australian super fund to start
your account based pension, there will normally be no tax payable on the
transfer. The only exception is if the rollover is from an untaxed scheme such
as some public sector schemes.
In that case, the taxable component (see below) of the rollover will be taxed
on entry to your Australian Catholic Superannuation account based pension.
The tax rate will normally be 15%. However, a higher rate applies to some very
large untaxed benefits.
Taxable and tax-free components
Tax on your pension payments
There is no tax payable on any tax-free component. The treatment of the
taxable component of your pension depends on your age.
What are you taxed if you are age 60 or over?
If you are aged 60 or over, your pension payments and any lump sum
withdrawals will be tax-free.
We are not required to report the pension payments to the Australian Taxation
Office and you are not required to include these payments in your income tax
return.
What are you taxed if you are under age 60?
There is no tax on any tax-free component and the taxable component of your
pension payments is taxed at normal PAYG rates. Tax will be deducted at the
top marginal tax rate if you do not provide your tax file number (TFN).
You will receive a tax offset to reduce the tax payable if you are:
• Aged at or above your preservation age;
• Totally and permanently disabled (regardless of age); or
• A reversionary beneficiary (regardless of age).
If you reach your preservation age during a financial year, the offset applies
only to pension payments made after your birthday.
The offset is 15% of the taxable component of your pension payments. If
you don’t have a tax-free component, it will be 15% of your whole pension
payment.
When you start your account based pension, it is divided into taxable and
tax-free components. You will normally have a taxable component, but you will
only have a tax-free component in limited circumstances, for example because
you have made after tax contributions to your superannuation account.
For example, Mary is aged 59. She elects to take a pension of $20,000 per
year. Her tax-free percentage is 10%.
All pension payments (and any lump sum withdrawals) will contain the same
proportion of taxable and tax-free components as your initial pension account
balance. For example, if your account balance is 90% taxable and 10% taxfree, each pension payment and lump sum withdrawal will also be 90% taxable
and 10% tax-free.
Taxable component of her pension = whole pension – tax-free amount
Calculating your tax components
Tax-free percentage =
tax-free amount
account balance
Tax-free component of her pension= 10% x $20,000
= $2,000
= $20,000 - $2,000
= $18,000
Offset = taxable component x 15%
= $18,000 x 15%
= $2,700
x 100
The tax Mary pays on her total income will reduce by $2,700.
For example, Peter invested $250,000 in the account based pension.
The components of his rollover were:
Taxable = $200,000
Tax-free = $50,000
Peters tax-free percentage =
$50,000
$250,000
x 100 = 20%
Peter’s taxable percentage = 100% - 20% = 80%
This means that every pension payment Peter receives will consist of a 20%
tax-free component and an 80% taxable component.
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Australian Catholic Superannuation – Offices in Brisbane, Canberra, Perth, Port Macquarie, Sydney, Townsville
t 1300 658 776
e [email protected]
PO Box 656 Burwood, NSW 1805
f (02) 9715 0090
w www.catholicsuper.com.au
SCS Super Pty Limited, ABN 74 064 712 607, AFSL 230544, RSE L0002264 Trustee of Australian Catholic Superannuation & Retirement Fund, ABN 24 680 629 023, RSE R1055436
@AusCathSuper
Pension
FACTSHEET 1 NOVEMBER 2016
Tax and account based pensions
Tax on lump sum withdrawals
Tax on lump sum withdrawals for members:
Component
Under preservation age
Preservation age to age 59
Age 60 or over
Tax-free
Tax-free
Tax-free
Tax-free
Taxable
Taxed at 20%
No tax on the first $195,000*
and the balance taxed at a
maximum of 15%.
No tax
*T hreshold applies for 2015/2016 and is indexed to Average Weekly Times Earnings (AWOTE)
in $5,000 increments. The tax rates above do not include the Medicare levy.
Terminal illness benefit
There is no tax on benefits paid as a result of a terminal medical condition.
Tax on death benefits
There is no tax on any tax-free component.
The tax on your taxable component depends on who receives the benefit. It
does not matter if the money is paid directly to the recipient or via your will.
Lump sum death benefits
Lump sum death benefits paid to your spouse (including a de facto or same
sex spouse), former spouse, child under age 18 (including a child of a same
sex relationship), person with whom you have an interdependency relationship
or financial dependants are tax-free.
The taxable component of a lump sum death benefit paid to a non-dependant
(for tax purposes) such as a non-dependent adult child will be effectively taxed
at 15% plus Medicare levy.
The Fund will increase the death benefit paid to a spouse, child or financial
dependant by applying an anti-detriment payment which effectively
compensates the recipient for any contributions tax that was previously
deducted from the member’s account balance.
Tax on reversionary pensions
Reversionary pensions will only be taxed if the deceased pensioner and the
reversionary pensioner are both under age 60. A 15% offset will apply to
reduce the tax payable.
If a reversionary pensioner stops the pension before age 60, and more than
6 months after the original pensioner’s death and more than 3 months after
probate, tax may apply to the payment if the money is withdrawn as a lump
sum, even if the pension was not taxed.
Disclaimer: This fact sheet has been prepared by SCS Super Pty Ltd ABN 74 064 712 607, AFSL 230544,
RSE L0002264, the trustee of the Australian Catholic Superannuation & Retirement Fund. Any advice contained
in this document is of a general nature only, and does not take into account your personal objectives, financial
situation or needs. Prior to acting on any information in this document, you need to take into account your own
financial circumstances, consider the Product Disclosure Statement for any product you are considering, and seek
independent financial advice if you are unsure of what action to take.
For more information contact our helpful staff:
1300 658 776
[email protected]
@AskAusCathSuper
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