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 age 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 age
- your reason for terminating employment.
The amount of tax payable will depend on whether you are under or over your preservation age, and whether you have provided your TFN.
The tax will be calculated and deducted from your benefit at the time of payment, unless the benefit is rolled over.
Taxation can have a significant impact on the dollar value of benefits you receive, so it is important you understand the tax rules or consult an expert adviser.
Since 1 July 1988, State Super has been required to pay Commonwealth tax on the employer contributions used to finance your benefits.
The amounts shown in the Annual Benefit Statement we send you each year are calculated after the benefit reduction has been applied.
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.
In addition, tax is payable on any contributions you make on a salary-sacrifice basis. Your benefits will be reduced to offset this tax (except in the event of your death).
Note: The benefit amounts shown on your Annual Benefit Statement are after an adjustment for contributions tax.
Your tax-free amount
Your tax-free amount comprises:
- the total amount of your after-tax personal contributions paid into SASS and older closed schemes ** since 1 July 1983 (or the date you joined the scheme, if later). These contributions are now called non-concessional contributions.
- any Commonwealth Government co-contributions and Low Income Super Tax Offset (LISTO).
- 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 Benefit 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. An overview is contained in STC Fact Sheet 3: Taxation.