Taxation and Super Funds

Taxation in Pension Phase

In the pension phase the tax rate is zero on any investment income earned on the underlying assets which are used to support pensions that start with a maximum balance of $1.6 million (indexed) per person. Amounts above this Transfer Balance Cap of $1.6 million must remain in accumulation phase with earnings subject to the normal 15% tax rate. If you only use a portion of the Transfer Balance Cap, the unused portion will be indexed.

Although the tax on income earned by the pension is tax free, the tax payable on the pension payments and any withdrawals will depend on the person’s age and the underlying components that make up their super. We review this later in the module.

Refer to the Tax and Structures module for more information on tax and super.