Tax on lump sum withdrawals

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 amount of tax applied to the taxable component of your payment 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

20% + Medicare levy

No tax up to $195,000*

15% + Medicare levy on the remaining balance

 Nil

 *Applicable for the 2015-16 financial year and indexed annually.

Under Age 60

If you make additional lump sum withdrawals from your retirement pension account, the taxable component of your payment will be taxed as a lump sum at 20% (plus Medicare Levy). Regular payments from a pension within the applicable minimum and maximum limits are not liable for this tax.

If you have reached your preservation age but are still under 60, you can access the taxable component of your super tax-free up to the low-rate threshold ($195,000 for 2015-16 and indexed each year). Amounts over the threshold will be taxed at the rate of 15% (plus Medicare Levy).

Tax does not apply to the tax-free component.

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

Age 60 or more

If you are aged 60 years or more, any lump sum withdrawals you make from your pension are entirely tax free.

 

Transition to Retirement members should note that they can only make lump sum withdrawals in limited circumstances, such as retiring or meeting another standard condition of release.