Tax on income

Your pension balance is made up of two components - the taxable component and the tax-free component. As their names suggest, the taxable component attracts tax, while the tax-free component doesn't. The proportion of these two components is calculated when you start your pension. This fixed proportion then applies to each payment you receive.

The amount of tax applied to the taxable component of your payments depends on your age.

Tax payable

Component of super benefit

Below Preservation Age

Preservation Age to 59

Age 60 and over

Tax-free

Nil

Taxable

Marginal rate plus Medicare Levy

Marginal rate plus Medicare Levy, less 15% pension offset

 Nil

Under Age 60

If you are under 60 you will be taxed on the taxable component of income you receive from your pension.

If you have reached your preservation age (55 to 59, depending on your date of birth) but are under 60, the taxable component of your pension payment will be taxed at marginal tax rates plus the Medicare Levy, less a 15% pension offset.

If you are aged under your preservation age, the taxable component of your pension payment will be taxed at marginal tax rates plus the Medicare Levy (no tax offset). In some circumstances, individuals under preservation age may be eligible for the tax pension offset (for example, if the pension is paid because of an eligible disability).

Tax does not apply to the tax-free component.

If your pension payments are taxable, tax will be deducted on a PAYG (Pay As You Go) basis. This is similar to the way tax is withheld from salary and wages.

We will deduct the appropriate amount of tax from the payments you receive and pay it to the Australian Taxation Office (ATO).

Age 60 or more

If you are aged 60 years or more, the regular payments from your pension are entirely tax free.