Taxation rules at 55 vs 60

I have a Q regarding how a pension is taxed at certain age.
Im still in my 40’s
Have my super in a defined benefit fund.

If i choose to retire at 55yrs - taxation is higher than if i retire at 60 (less taxation).

Does the same principle apply if i did retire in my late 50’s and pay more tax, once i turn 60 - do i presume that i will at that time then be taxed less (regardless that my pension drawdowns began in my late 50’s)

Cheers

 

Is it a state or federal super scheme?
An old one or one of the newer ones?

 

What happens to your DB fund when you "retire"? Does it have a tacked on DB pension, or do you have to roll it over into a market-based pension scheme from which you have to withdraw using "normal" rules?

When you hit 60 your account withdrawals should be free of tax - although if you're in your 40s now, who knows what the rules will be then - this is irrespective of whether you started drawing down in your 50s or not, but also to some extent depends upon the structure of the account you're in when you retire. You get an "allowance" that is tax free before 60 - that'd be enough to keep most people happy for 3 or 4 years - but again, we're talking at least a decade in the future for you here, so the rules will have changed by then, almost certainly.

 

Assume you’re taking a pension.

Return of your own contributions are tax free

Taxable taxed are probably at your marginal rate until 60 when they too are tax free

Taxable untaxed are MTR. Depending in the scheme there may be an offset

Happy to explain further if it’s PSS

 

Thanks for the tips, yes its PSS

 

Have you searched your superannuation providers web-site for any relevant fact sheet. They usually put plenty of information up for their members?

Alternatively have you asked them in writing? That can be of assistance too.

 

Then it's as I explained, unless your pension is over $100k p.a
Tax free (member component) always tax free
Taxable taxed (productivity plus earning on productivity and member component) MTR until after 60 when it's tax free
Taxable untaxed is always MTR, but you get a 10% offset of this amount when over 60

There are some variations if you hit your preservation age before 60. There's a whole thread on whirlpool, but check these resources out

https://www.csc.gov.au/-/media/Files/PSS/Factsheets/PSF27-tax-and-your-pss-pension.pdf

 

Tax Law defines what occurs to the elements of superannaution received. At or after age 60 much is tax free excepting some older funds where a 15% tax applies (since the fund wasnt taxed on the way through). Prior to age 60 tax applies with some offset allowed.

The notional balance of the fund also needs to be understood. While DB funds dont have a account balance recent laws apply a notional balance and limit the tax concessions where the DB balance is $1.6m or more. They way DB account balances are determined can be illogical and are criticised as unfair.

Licensed financial advice is recommended

 

Slightly misrepresentative, as that’s not how PSS DB tax on pension is calculated, and it seems you’re talking about how the PSS pension is valued to calculate the TBC (ie 1.1 mill can = 1.1 mill if taken as a lump sum, but 100k (1.1 mill /11) x 16 if taken as a pension at age 60 equates to 1.6 mill)

PSS DB fund has a benefit accrual, calculated as ABM x FAS.

Links I supplied above cover the content pretty well

 

You can also go to the CSC website and see what your tske home pension is if you retire at various ages. It is wuite interesting to see how it changes depending on your retirement age.

 

Agree its not how a pension is calculated but a DB pension can affect other super balances for self or a spouse (if member dies). My comment was "the notional balance also needs to be understood"...Yes the TBC notional balance.

You cant look at the pension issue in absolute isolation. It can have impacts. And when this does occur it can be quite nasty and affect decisions

 

Great stuff peoples
The factsheet link above had the answers re tax after 55yrs and what it changes to when you reach 60
#thumbs up emoji!!