The portion of a superannuation benefit derived from concessional (pre-tax) contributions and taxable earnings. This component may be subject to tax when paid as a benefit, particularly to non-dependants.
Every super benefit splits into two components: the tax-free component and the taxable component. The taxable component is the amount that received concessional tax treatment during accumulation: employer contributions, salary sacrifice, personal deductible contributions, and all investment earnings.
Tax on the taxable component depends on benefit type, member age, and beneficiary relationship. The tax-free component is never taxed.
| Component | Source | |---|---| | Taxable | Employer SG, salary sacrifice, personal deductible contributions, all investment earnings | | Tax-free | Non-concessional contributions, government co-contributions, certain CGT-exempt amounts, crystallised pre-1983 amounts |
| Benefit type | Age | Tax rate on taxable component | |---|---|---| | Retirement lump sum | Under preservation age | 22% (20% + 2% Medicare) | | Retirement lump sum | Preservation age to 59 | 0% on first $235,000 (low-rate cap, 2023-24); 17% above | | Retirement lump sum | 60+ | Tax-free | | Disability super benefit (permanent incapacity) | Any | Tax-free | | Death benefit lump sum to tax dependant | Any | Tax-free | | Death benefit lump sum to non-dependant | Any | 17% (15% + 2% Medicare) |
The untaxed element (typically from public-sector schemes that did not pay 15% contribution tax) is taxed at higher rates, generally 30% + 2% Medicare for non-dependant death benefits.
The ATO requires that any withdrawal or benefit payment is split proportionally between the two components. You cannot direct payment from only one component. The proportion is fixed at the time of payment based on the member's total interest. Authority: Income Tax Assessment Act 1997, Division 307 and Taxation Ruling TR 2010/1.
When David dies at 58 with a $600,000 super balance ($500,000 taxable component, $100,000 tax-free component), his adult son receives the benefit. The $500,000 taxable component is taxed at 17% ($85,000 tax), while the $100,000 tax-free component is not taxed, resulting in $515,000 net benefit.
Emma, 55, claims a TPD benefit of $400,000 from super ($350,000 taxable, $50,000 tax-free). As she's permanently incapacitated, the entire benefit is paid tax-free, including the taxable component.
James, 62, withdraws his $800,000 super balance ($700,000 taxable component, $100,000 tax-free component) as a retirement lump sum. As he's over 60, the entire amount is tax-free, regardless of components.
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