How RI Allocated Pension is taxed
When you open a RI Allocated Pension account, you might need to pay tax on the money you transfer from your super. How you’re taxed depends on whether you have a taxed fund, like GESB Super, or an untaxed fund, like West State Super or Gold State Super.
In general, you pay less tax when you transfer your super to an allocated pension, than you do if you take your super as a lump-sum payment.
Investment earnings are tax-free
A RI Allocated Pension offers tax benefits, which means you might pay less tax than you would if you chose another type of investment. There are two ways you can benefit:
- Investment earnings in your pension account are tax-exempt
- If you’re 60 or over, your regular income payments and lump-sum payments from your pension are tax-free
Here’s a summary of the tax rules that apply to your RI Allocated Pension account.
Different parts of your pension are taxed differently
Your RI Allocated Pension account may include two different parts or ‘components’. Each part is taxed differently, depending on where the funds come from. You might have:
- A tax-free component - the tax-free part of your super benefit that was transferred to your pension account. You do not pay tax on this amount. For example, it would include personal contributions made to your super that you didn’t claim as a tax deduction. If you transferred from West State Super or Gold State Super, it would also include any part of your benefit that was taxed at 47% because your balance was above the untaxed plan cap.
- A taxable component - the taxable part of your super benefit that was transferred to your pension account. You may pay tax on this part of your pension when you access it. For example, it would include employer and salary sacrifice contributions.
How tax applies to your regular income and lump-sum payments
The two tables below provide a summary of how tax applies to your regular income payments and any lump-sum payments from your RI Allocated Pension.
Tax treatment for the 'Taxable component - taxed element' of your pension account
Age | Lump-sum payments tax withheld rate (including 2% Medicare Levy) | Income stream payments tax withheld rate (plus 2% Medicare Levy) |
|---|---|---|
22% | Taxed at your marginal tax rate, with no tax offset1 | |
Commonwealth preservation age - 59 | For payments up to the low rate cap of $235,0002 - 0% For payments above the low rate cap - 17% | Taxed at your marginal tax rate, less a 15% tax offset on the taxable component |
60+ | Nil | Nil |
Tax treatment for the 'Tax-free component' of your pension account
| Age | Lump-sum payments tax withheld rate (including 2% Medicare Levy) | Income stream payments tax withheld rate (plus 2% Medicare Levy) |
|---|---|---|
Under Commonwealth preservation age | Nil | Nil |
Commonwealth preservation age - 59 | Nil | Nil |
60+ | Nil | Nil |
You will pay no tax if you’re aged 60 or over
If you are 60 or over, your regular income stream payments or lump-sum payments from your RI Allocated Pension will be completely tax-free and you won’t need to include these payments in your personal income tax return.
Examples of how regular income payments are taxed
If your pension account has a tax-free and a taxable component, your regular income payments will include a proportional amount drawn from each component, based on the total value of your pension.
Here are two examples of how income payments are taxed according to your age and the components of your account.
| Example 1: Fiona, aged over 60 | Example 2: Frank, aged under 60 |
|---|---|
210,000/250,000 x 1,600 Tax-free + Taxable-taxed = $1,600 Fiona is over 60, so the total amount of her pension payment will be tax-free. |
310,000/350,000 x 1,400 Tax-free + Taxable-taxed = $1,400 Frank is 57, so he will need to pay tax on the taxable-taxed component at his marginal tax rate (plus 2% Medicare Levy). A 15% tax offset on the taxable component is available to reduce the amount of tax he needs to pay. He will not pay tax on the tax-free component. |
To learn more about how your RI Allocated Pension is taxed, you can:
- Read the tax section on page 34 of the Product Information Booklet
- Call your Member Services Centre on 13 43 72
1 Tax offset is available for a disability super benefit.
2 For the 2023/24 financial year, indexed annually in line with Average Weekly Ordinary Time Earnings in increments of $5,000 rounded down.
Need help
- Attend a seminar
- Book a Retirement Options Service appointment
- Call us on 13 43 72
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