Before withdrawing your superannuation to shout the bar a bunch of pina coladas, you should first understand the potential tax on super withdrawals. Because, let’s face it, tax-free pina coladas taste so much better!
Tax on Super Withdrawals
Okay, talk to me. Are you thinking of withdrawing your super as a lump sum or as a pension payment? Either way, lucky for you, I’ve got both covered. And, there’s a few tricks, so pay attention.
This article explains how lump sum withdrawals are taxed when withdrawn as a lump sum and when withdrawn as a pension payment.
To apply these tax rates to your superannuation account, you will need to contact your superannuation provider to find out the tax components of your balance.
The three tax components I will refer to are the tax-free component, the taxed component and the untaxed component.
Tax on Lump Sum Super Withdrawals
The tax on lump sum withdrawals will depend on your age and your superannuation balance tax components.
All lump sum withdrawals must be made proportionately from each tax component based on the proportions on the day of the withdrawal.
Read more: Superannuation Lump Sum Withdrawal Rules: Your Complete Guide
Tax Rates on Lump Sum Withdrawals
The tax rates below show how your age and tax components affect the tax on lump sum withdrawals.
Aged 60 or over
If you are aged 60 or over, the tax components of your lump sum withdrawal will be taxed as follows:
- Tax-Free component: 0%
- Taxable component: 0%
- Untaxed component: The lesser of 17% and your marginal tax rate (up to the untaxed plan cap, then 47%)
Under Age 60
If you are under age 60, the tax components of your lump sum withdrawal will be taxed as follows:
- Tax-Free component: 0%
- Taxable component: The lesser of 22% and your marginal tax rate
- Untaxed component: The lesser of 32% and your marginal tax rate (up to the untaxed plan cap, then 47%)
This video explains when you can access your super tax-free:
Tax on Pension Payments
Similar to lump sum withdrawals, tax on superannuation pension payment withdrawals will be determined by your age and the tax components that make up your pension balance.
All pension payments must be made proportionately from each tax component, based on the proportions of your superannuation pension balance.
Tax Rates on Super Pension Payments
The tax rates below show how your age and tax components affect the tax on pension payments.
Aged 60 or over
If you are aged 60 or over, the tax components of your pension payments will be taxed as follows:
- Tax-Free component: 0%
- Taxable component: 0%
- Untaxed component: Your marginal tax rate
Under Age 60
If you are under age 60, the tax components of your lump sum withdrawal will be taxed as follows:
- Tax-Free component: 0%
- Taxable component: Your marginal tax rate (a tax offset equal to 15% of the taxable component is received if this is a disability super benefit)
- Untaxed component: Your marginal tax rate
As you can see, there’s quite a few things you need to take into account in determining how much you will pay on a superannuation withdrawal, whether it’s a lump sum withdrawal or a pension payment.
Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
Discover More Content on SuperGuy:
- How Much Superannuation Should I Have at My Age?
- Superannuation Advice: Your Complete Resource
- How Much Can I Withdraw From Super Tax Free?
- What Is Super Contributions Tax?
- Tax On Super
- Superannuation Minimum Drawdown
Hi, I hope you enjoyed reading this article.
If you want my team and I to help with your retirement planning, click here.
Thanks for stopping by - Chris
