State Super will send a PAYG payment summary to all pension members at the end of each financial year. The PAYG payment summary confirms the amount of pension a pension member has received in that financial year and the amount of taxation (if any) deducted. Where a member turns 60 during a year and receives pension payments both before and after turning 60 they will receive two payment summaries.
Members generally have to report income where the member is under 60 or where the pension income is in excess of $100,000. Where a member is under 60 the full amount of the taxable component of the pension – which is shown on the payment summary – is taxable income.
Where a member is aged 60 or over a pension will only be taxable if it is more than the member’s defined benefit income cap, which is generally $100,000 per annum. If a member's pension is more than their cap, 50% of the amount that exceeds their cap is taxable income. (Note: the cap will be reduced in the year that a pension commenced to be paid and in the year that a member turned age 60).
A pension member will be required to lodge an income tax return if their taxable income, from all sources including their State Super pension, is higher than the thresholds set by the Australian Taxation Office (ATO) or if the pension member has had tax deducted from their pension.
For additional information about taxation, please contact the Australian Taxation Office.