Ken is confused about how his Age Pension and income stream are taxed. Debbie explains the tax situation and how his income stream is assessed by Centrelink.
I am very interested in how Centrelink treat the income I receive from my super pension, as I am told that all income received from my super/pension is non-taxable. On Centrelink’s website, it states: “Income streams such as an annuity or a pension, although technically a superannuation product, are not covered by these rules.”
Am I correct in believing that my pension is free of income tax?
What rules apply to the pension I now receive from my super?
How your pensions are taxed depends on your overall tax liability.
If you were to only receive a Government Age Pension, then there are tax offsets available to ensure that you pay no tax. Similarly, if you have other income but are below the allowable threshold, then you will not pay any tax. Centrelink issues you with a payment summary each year, which details your payments, any tax withheld and any tax exemptions.
In regards to your superannuation pension, how Centrelink assesses your income from super and how it is managed by the ATO for tax purposes are two different things. Once you reach Age Pension age, or commence an income stream from your super, then this is regarded as a financial asset and deemed to earn income. As you are over 60, this income should be tax free.
If you have any concerns about whether or not you are paying tax that you shouldn’t be, you should contact the Australian Tax Office (ATO).