If you are over age 60, any benefits paid to you (as a lump sum or, if applicable, as a pension) are tax-free and not assessable for income tax purposes.
If you are under 60, all benefits are subject to Commonwealth benefits or income tax. The actual tax payable varies depending on issues including:
- the type of benefit taken
- your tax-free amount
- your eligible service period
- your age
- reason for terminating your employment.
The tax will be calculated and deducted from your benefit when it is paid to you.
Taxation can have a significant impact on the benefit you receive, so it is important to understand the tax rules or consult an expert adviser.
Your tax-free amount
Your tax-free amount comprises:
- the total amount of your after-tax personal contributions paid into PSS since 1 July 1983 (or the date you joined the scheme, if later). These contributions are now called non-concessional contributions (previously called undeducted contributions)
- any Commonwealth Government co-contributions and low income superannuation contributions (LISC)
- the proportion of your benefits (if any) that relates to service before 1 July 1983. In accordance with Commonwealth tax requirements, this component was calculated at 30 June 2007.
Your tax-free amount and eligible service period start date are shown on your Annual Statement.
The tax-free amount is apportioned between the benefits you receive from the scheme, including the basic benefit.
The tax treatment of superannuation is complex. You can find an overview in STC Fact Sheet 3: Taxation.
Commonwealth tax at the rate of 15% is payable by the scheme on most employer contributions for service from 1 July 1988. As a result, most employer-financed benefits accrued from 1 July 1988 are reduced by 15%, except for lump-sum death benefits. However, you compensate for this by paying reduced income tax when you receive your benefits. The amounts shown in the Annual Statement we send you each year are calculated after the benefit reduction has been applied.