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Taxation of super benefits

Proportioning - accumulation phase

Section: 7.11

A super interest in the accumulation phase is valued just prior to the benefit payment to obtain the proportions of the lump sum (including a death benefit) or rollover. The percentage of tax- free and taxable components of the super interest is applied to the super benefit being paid.

The treatment also applies to commutations from deferred superannuation income streams that have not yet commenced to pay income stream benefits prior to the commutation.

Example

Just prior to taking a lump sum payment of $10,000, the components of the member's super interest are as follows:

- $60,000 tax free, and
- $40,000 taxable component.

The $100,000 super interest is 60% tax free and 40% taxable. The $10,000 lump sum payment will be 60% tax free and 40% taxable.

Note: If the member is age 60 or over the taxable component will not be assessable income (not subject to tax).

Last modified: Wednesday, July 24, 2019