How much will i be taxed from super on retirement

Hi

I have tried to get answers from PSS regarding taxation on my super in retirement.

They cannot provide anything unless i am retiring in next 12 months, but its still some years away yet.

Is there a general consensus as to how much my super pension would be taxed, is it just like a normal payg tax system or discounted....

 

I am not an accountant/advisor but my understanding is that the anything under the threshold, currently $1.6M per person and indexed, is tax-free.

Minimum, mandatory pension rate is 4%. So a couple can retire with $3.2M in Super, pay themselves a pension of $128,000 and pay no tax (income or CGT).

How much will you have in Super when you retire? When will you've retiring?

 

....and punters don't see super as a good wealth-building scheme.

 

PSS (Public Sector Super) is a government pension scheme. My understanding is that contributions are not taxed on the way in as per conventional super.
How much you will be taxed will depend on your age and taxable/non taxable components - presumably available on a year statement.

See this info sheet : https://pss.gov.au/storage/PSF27_201505.pdf

 

cheers Cadbury
Had read that fact sheet - i need to be an accountant to understand it.
Yep looks like i'll be taxed on way out, its just how much .....
atleast this is one of the golden egg supers - like what the pollies are on, so unlikely it will be fiddled with much, so should be all pretty good come retirement time next decade

 

Yes, PSS is treated quite different to other "taxed" super. There is a senior's offset however if your earnings breach that threshold, my understanding is that you're taxed as per anyone else still working. Ie. marginal tax rates. This is a complicated mess that I too have struggled to understand (as I'm also affected). One thing is for sure, it won't be "tax free" as government or defined pension schemes need to be taxed on the way out,,,, so reject all notions of "tax free" for this type of super. Such is life...

 

Not true for PSS or government Defined Benefit Schemes..... as the government doesn't pay tax on contributions .... actually, the government doesn't even pay the contributions to my knowledge as they treat it as a deferred debt. The recipient pays tax when receiving a benefit & I've found that few people realise this fact. It certainly takes the shine off what many perceive to be generous super schemes as the tax hit certainly has a profound impact (note: I'm not referring to politicians super here as that is a completely different beast)

 

Yeah, in my haste, I missed the PSS bit.

 

So you making 10% contributions keentolearn & planning/hoping to take a package in a couple years time?

 

It should have the offset taken off the marginal rate right?

 

For $100,000 p.a could you just make sure you are not an absentee? Easy to do.

 

First here is a little calculator so you can have a play

pay calculator

I won't vouch for it's accuracy but then it has disclaimers as well.

The stuff from the Gov can seem confusing unless you are well versed in the termanology but let's do a simple approach and say your going to get $60K pa, it's all from untaxed funds and you're under 60. So it will be taxed according to the relevant tax scales.

The fortnightly amount you will receive is $60K divided by 26 (not the $60k multiplied by 12 and then divided by 313 as happens with salary earners to take account of the 27 pay periods every 13 years). So on that basis you will pay about $470 per fortnight in tax.

Once you reach the age of 60, you get a 10% rebate on your tax. That amount is calculated by dividing your gross fortnightly pension by 10 and that amount is then deducted from the tax. So that is around $230 per fortnight and the total tax taken out each fortnight reduces to $240.

Now as an oddity, in order to comply with the current legislation about the $1.6M in super, the government had to come up with some way to take account of defined benefit pensions.

What they have done, from 1 July 2017, the first fortnightly gross pension made to a person who is retired is multiply that by 26 and then multiply that by 16 - I didn't dream the numbers up, the Government actuary did, so blame them. That gives you your transfer balance cap (a one-off snapshot). In the case of a $60k pension that's $960k. I believe it means if you have more than $640k in super elsewhere at retirement, the earnings on anything over $640k will be taxed within the fund at $15% on income and 10% on capital gains.

I most likely have spread confusion and alarum but I reckon if you just take it step by step you'll get an undestanding of the situation.

 

Had a wild guess and it was correct

Benefit estimate — PSS

I am not a member of the PSS but for those who are, it could be useful. As always with these things the further out your retirement, the less reliable they are - way too many variables such as inflation, returns, etc.

 

Absentee - pls explain terry??

 

Thanks Satay King - interesting calculations.
I'm still too many years off retiring but looking ahead, no doubt the tax man will tax my pension harder if I've worked and saved hard for other asset classes to help me in retirement

 

Depends whether you're PSS AP or PSS DB (accumulation vs defined benefit). @SatayKing has got it right I think for the DB version (and CSS which is the earlier defined benefit but different to the later PSS DB). Neither pension is taxed AFAIK (well, after age pension age), but the 16x multiplier can certainly take people over the $1.6M cap, especially the older folk doing 54/11 exits. Choices are lump sum, lump sum plus part pension, or full pension. Some of the pension is indexed but some isn't (for PSS at least - I think CSS is fully indexed).
It's even as interesting seeing what knots they get upto calculating for the now $25k annual contribution limit !

Interesting that the newly removed 50% pension calculation for income assessment to the aged pension doesn't apply I think to CSS and military super. e.g. if you're pension is $100k, then for anyone else 90% is used as the annual income vis a vis the aged pension - i.e. you wouldn't be eligible even as a couple. But not for military, who I believe still get 50% off so could still be eligible for some couple aged pension even if on the $100k! (checked and edited)
The whole defined benefit - accumulation transition was and is a complete mess as far as I can see ...

 

In qld absentees pay more land tax

 

Sorry I think I posted that in the wrong thread somehow

 

Dare I say it, but could you visit a financial planner with experience of calculating PSS pensions to calculate how much you would take if you retired this year, next year, or any year into the future (as you say, based on today's information).

Depending on how comfortable you are with the planner, you could then extend this to include the impact of your other assets/income on PSS retirement income (ie would having income from other assets impact on your PSS etc?), and/or if you moved away from a PSS employer and had to preserve the PSS benefits.

(As an aside I understand that we all have different opinions of experts, depending on our experience, but as long as the expert value adds to our existing knowledge, then all good. As others have said, it's your money, educate yourself, and have others value add to that knowledge. Rant over).

 

@Terry_w raises an interesting point. Would you continue to receive the PSS retirement benefits unaffected if you moved out of Aus?