Tax on pensions

A tax-effective way to fund your retirement

If you are aged 60 or over there is no tax payable on the income from your Club Plus Pension.

If you are aged less than 60, then Club Plus Super deducts tax at the relevant Pay As You Go (PAYG) rate that applies to the amount paid and the income from your Club Plus Pension is included as part of your total income when you prepare your tax return.

Club Plus Super will deduct tax from your pension based on the amount of pension being paid, taking into account any deductions and rebates that are applicable according to the information that you have supplied to us.

If you are aged less than 60 and receiving a Transition to Retirement pension and still working, your tax will be assessed by the Australian Tax Office (ATO) based on your combined income. The ATO will assess your income tax liability based on the information contained in your Tax Return after taking into account all income, deductions and rebates.

Tax concessions

There are two concessions that are applied to income from a pension:

  1. Super used to start a Club Plus Pension consists of a taxable component and a tax-free component. For pension payments received before reaching age 60, no tax payable on their tax-free component. For example, if you invest $100,000 into your Club Plus Pension, and those funds consist of a $20,000 tax-free component and an $80,000 taxable component, only 80 per cent of your Club Plus Pension income would be assessable for tax. No tax is payable on the remaining 20 per cent. Once you reach age 60, no tax is payable on your Club Plus Pension income.
  2. The Commonwealth Government allows pension members aged between 55 and 59 to receive a tax offset of 15 per cent, which reduces the amount of tax you would otherwise pay. The offset is calculated as 15 per cent of the taxable amount of the pension for that year. Once you reach age 60 this offset no longer applies as tax is no longer payable on your Club Plus Pension.

The following table indicates how tax on a Club Plus Pension might be calculated for a member aged under 60.

Tax calculation
Gross pension paid $10,000.00
Minus tax-free amount $2,000.00
Taxable pension $8,000.00
Tax on taxable pension* $420.00
Minus 15% tax offset $1,200
Actual tax payable on pension Nil

*The tax on the assessable pension is based solely on the rates for the 2013/2014 financial year (including Medicare Levy) and is for illustrative purposes only. It does not take into account any other factors and cannot be used to calculate the tax that might be payable on your pension.

For Australian residents a tax-free threshold of $18,200 applies – that means the first $18,200 of your income is tax-free. This amount can only be claimed once a year, so if you have another pension or source of income that you have applied your tax-free threshold to, then it will not apply to your Club Plus Pension income.

In this case no tax is payable on the taxable pension ($8,000) as it is less than the tax-free threshold ($18,200), so the 15 per cent offset does not apply.