Commonwealth preservation age to determine tax rates & EATS eligibility
From 1 July 2015 an increased tax rate will apply to super benefit payments cashed before you have reached your Commonwealth Government preservation age – the age that will also determine your income stream eligibility.
The impact of the changes the Commonwealth Government made to its super preservation rules as part of the 2007 Stronger Super package of reforms will occur on 1 July 2015, which marks the first group of people turning age 55, but not reaching their Commonwealth Government preservation age.
The 2007 changes established that the lump sum super tax rates would be based on whether a person had reached their Commonwealth Government preservation age. Previously the lump sum tax rates were based on whether they had reached ‘age 55’.
Alignment between tax rates and preservation age
While the alignment between tax rates and Commonwealth Preservation age was legislated in 2007, from 1 July 2015 an increased tax rate will apply to super benefit payments cashed before you have reached your Commonwealth Government preservation age – the age that will also determine your income stream eligibility.
- Tax rates for cashed benefits: the tax rate of 15% will no longer commence at age 55 but at Commonwealth Government preservation age.
- Income stream: Commonwealth Government preservation rules will determine the age you can purchase an income stream.
Super SA schemes
While Super SA’s Triple S, Lump Sum and Pension Schemes are not required to comply exactly with the Commonwealth preservation rules due to their status as Exempt Public Sector Superannuation Schemes (EPSSS), the changes will affect members of these schemes born after 30 June 1960.
The following tables summarise the changes
Table 1: Age at which 15% on super lump sum cash payments up to $185,000 commences
|Curently:||1 July 2015:|
|From age 55 (regardless of your Commonwealth preservation age)||From your Commonwealth Government preservation age|
Table 2: Impact of increase to Commonwealth Government preservation age on Super SA's Exempt Public Sector Super Schemes (EPSSS)
|Super SA EPSSS Schemes||Unchanged||Changed|
Still able to cash benefit from age 55, as long as you have ceased employment (nb you do not have to be permanently retired or have reached Commonwealth Government preservation age).
An untaxed benefit taken as a cash lump sum prior to reaching your Commonwealth Government preservation age will be taxed at a rate of 30% plus Medicare.
Members who turn age 55 in the next financial year will not be able to access the Super SA Income Stream. This includes for the purpose of Early Access to Super (EATS) or Transition to Retirement (TTR) until the following year when they turn age 56.
|Lump Sum Scheme|
Table 3: How tax is calculated on your entitlement from 1 July 2015
|Your age||Tax on taxable (untaxed) component||Tax on taxable (taxed) component|
|Under Commonwealth preservation age||30% maximum tax rate up to $1,355,000||20% maximum tax rate (no limit)|
|Commonwealth preservation age up to age 59||
15% tax up ot $185,000
30% tax on balance up to $1,355,000
Taxed at 0% up to $185,000
15% tax on balance (no limit)
|60 or over||15% tax on amounts up to $1,355,000||Tax free|
- Tax: Triple S, Lump Sum, Pension Scheme, Income Stream and Flexible Rollover Product
- EATS fact sheet: Triple S
- TTR fact sheets: Pension Scheme
Super SA: if you’d like to discuss your options, our Member Solutions Team can help. You can call them on 1300 364 941.
Commission-free financial advice: for detailed financial advice about what’s best for your situation Super SA recommends you speak to a licensed financial planner.