Turning 60 - what does it mean for super fund members?

What happens to my super interest when I turn 60?

Your super fund will determine the proportion of tax-free and taxable components of your super:

• just before a benefit is paid to you in the case of a lump sum payout, and
• when your super income stream commences, for a super income stream benefit.

The same proportion of tax-free and taxable components will then apply to any benefits, whether lump sum or income stream, that your super fund pays you from then on.

How will my super benefits be taxed when I am aged 60 or over?

If you are paid a super benefit, whether a lump sum or income stream (such as a pension), and this benefit has a taxable component that consists wholly of an taxed element in the fund, the benefit will be tax-free.

If the taxable component of the super benefit contains an untaxed element in the fund (as in certain public sector super funds), the untaxed element of the taxable component of the lump sum will be subject to tax at special rates. The taxable component of an income stream is subject to ordinary rates of tax. However, a tax offset will be available to reduce the tax payable on the benefit.

For further information on untaxed and taxed elements in the fund, please refer to How your super payout is taxed.

Can I still claim a tax offset for a super income stream?

You will be eligible to claim a tax offset equal to 10% of the element untaxed in the fund if:

• you are aged 60 or over
• you receive an income stream benefit, and
• the taxable component of the benefit has an element untaxed in the fund.

Can I still claim a deductible amount (or tax-free component) for an income stream?

You may be eligible to claim a deductible amount – which is now referred to as the tax-free component – if you:

• are aged 60 or over, and
• receive a super income stream benefit which contains an element untaxed in the fund.

Generally, your super fund will calculate the deductible amount for you.

Is there a cap if I take a super lump sum?

You can receive concessional rates of tax up to $1 million (for 2007-2008) on the element untaxed in the fund if you:

• are aged 60 or over, and
• receive a super lump sum that includes or consists of an untaxed element in the fund.

This untaxed plan cap is subject to indexation.

Will I still receive a payment summary?

There will be no tax withheld from the benefit and you will not receive an annual payment summary if you:

• are aged 60 or over throughout the year, and
• receive a super income stream benefit that does not include an untaxed element in the fund.

You will receive an annual payment summary if:

• you are aged 60 or over, and
• your super income stream benefit includes or consists of an untaxed element in the fund.

The payment summary will show the taxed and untaxed elements of the taxable component, the tax-free component and any applicable tax offset amount.

Tax will be withheld and from the taxable component of any benefits you receive before you turn 60 and you will receive payment summaries for those benefits.

Excessive RBL determination upheld for superannuation pension

In AAT Case [2007] AATA 1732, Re Kerr and FCT the AAT held that a taxpayer was not entitled to a 15 per cent pension tax offset in respect of a non-complying superannuation pension as he did not qualify for the higher pension RBL. The taxpayer argued that the Commissioner should exercise his discretion to find 'special circumstances' under s 140ZB of the ITAA 1936 as he had allegedly relied on incorrect advice from a financial planner to the effect that more than 50 per cent of his various benefits were in the form of a complying pension.

Tax-free lump sum super for those terminally ill

The Assistant Treasurer has announced that the Government will amend the law exempt people with a terminal illness who access their superannuation under the age of 60 from the tax on their lump sum benefit. Amendments to the legislation will have effect for payments received after 11 September 2007. Until the legislation passes into law, Mr Dutton said the Government has asked the Commissioner of Taxation to consider changing the rate at which superannuation funds are required to withhold from payments to people in these situations.

NSW: abolition of mortgage duty

The NSW Office of State Revenue has advised that NSW mortgage duty for owner-occupied housing was abolished from 1 September 2007.

Super concessional contributions

The Tax Office has responded to concerns raised by the Institute of Actuaries of Australia (IAA) in relation to the treatment of superannuation concessional contributions and allocations from reserves. The Institute had expressed concerns to Treasury about when an allocation from a superannuation fund reserve will be counted against a member's concessional contributions cap.

Preparation of SMSF trust deed by tax agent company

In Legal Practice Board v Computer Accounting and Tax Pty Ltd, the Supreme Court of Western Australia has dismissed a statutory contempt charge against a tax agent company for allegedly engaging in unauthorised legal practice by obtaining and acting on instructions for the preparation of a trust deed for a self-managed superannuation fund.