Super can be a tax-effective way of saving for and receiving an income in retirement compared to other types of non-super investments, but there are some key considerations to keep in mind.

The Australian tax system can be complex, and there can be significant tax implications associated with super. It’s always a good idea to get professional advice when making any decisions about your financial future.

Below is a general summary of how tax works with a super pension – but please remember this isn’t a comprehensive tax guide:

  • 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.
  • If you’re under 60, tax generally depends on your age: If you receive pension payments under age 60, the taxable component of your pension is subject to Pay As You Go (PAYG) withholding tax. This means we must withhold tax from your pension payments and send it to the Australian Taxation Office (ATO). Note: Different tax rules apply to lump sum withdrawals.
  • Superannuation pension tax offset: If you’re between your preservation age and age 59, or if your pension is a disability or death benefit pension, a tax offset of up to 15% of your assessable pension income may apply.
  • Tax-free investment returns: All investment returns applied to a pension account, which may be positive or negative, are tax-free.