Age Pension – is my pension super taxed?

Ken is confused about how his Age Pension and income stream are taxed.

Mature man in office looking at finanical documents

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.

Q. Ken
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).

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    COMMENTS

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    Eddy
    13th Feb 2017
    10:24am
    Debbie, I you are hope that some superannuation income streams are taxed, particularly pensions received from government (including police and teachers) and defence defined benefit pension streams. They are also subject to the medicare levy.
    When you answer similar questions you may need to add a qualification between taxed and non-taxed schemes.
    Rosret
    13th Feb 2017
    2:06pm
    Eddie that lovely secure Teacher's superannuation fund,(and others like it) that you refer to closed in 1990 so its only the old guard that benefit from it now. If those people earn over a certain amount they will be taxed.

    For the rest its juggling the private super funds and the whim of the stock markets. The individual is forced to draw down 4% p.a. so I don't know if that is taxed or not. Someone may be able to tell me.

    Personally, I know that my cache at retirement must see me through until I die and I count on a percentage interest return. It's a tough way to retire and I sincerely feel for people who are not money savvy.

    Some people do spend til they qualify for a pension but others like myself don't see superannuation as a never ending ATM withdrawal window.
    Sundays
    13th Feb 2017
    2:38pm
    Rostret that 'old guard' you refer to consist of 180,000 plus people in the commonwealth and military schemes plus thousands more in the university and State schemes. As Eddy has rightly pointed out they do have to pay tax on all, or part of their superannuation pensions and I agree that a qualification is needed. If you are over 60 and drawing down your 4% this is tax free and not to be included on your tax return (if you have other investments and you need to lodge one)
    Jim
    13th Feb 2017
    4:59pm
    Superannuation funds are taxed, it is called earnings tax, I think! So in effect if you have money in super you are paying 15% tax you are also deemed to be earning 4% on your super and other assets I think you only have to draw down 4% if you are using your super as an income stream, otherwise you can make periodic withdrawals tax free depending on your other sources of income. I have always found Centrelink to be pretty good for advice on most of the things that affect your pension.
    Blinky Bill
    13th Feb 2017
    6:31pm
    Dear Eddie, there maybe taxed and untaxed schemes, whatever they are e.g. antique clocks etc, however when it comes to legitimate superannuations they are all taxed. Unfortunately some inappropriate terms have been used, which leads to understandable confusion for some people. Some government superanuation schemes were identified as non-taxed schemes, which was an inappropriate term. What this really means is, these schemes did not deduct any tax on contributions when made, that is on the way in. However, when these government superanuation schemes are changed to an income stream upon retirement of an individual tax is then paid. That is, tax paid on the way out, which is then submitted to the ATO. Unlike most other superanuation schemes that deduct 15% from contributions made on the way in; e.g. of a $1000 contributed, $150 would be paid to the ATO, while the remaining $850 would be added to your superanuation nest egg. To the best of my knowledge, I believe that all such government superanuation schemes have been closed as pointed out by Rosret. The amount of draw down that Rosret refers to does not distinguish between government and/or private income streams. The amount depends upon one's age, which starts off at 4% and increases overtime. Rosret also states that his cache must see him through until he dies. However my understand is that if one's current total cache in an income stream is greater than $813,000 then no pension will be paid. But, if the amount is less than this then there is a good possibility of a part pension and when that cache is a lot less a full pension will be paid. Assuming all other requirements are met. I do hope this clarifies at few points for those interested. Wishing all a bonza day.


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