Understanding tax on super and non super monies

[Latestarter55]

I think I'm right in saying monies withdrawn from super in retirement are tax free (for the moment). Current income tax thresholds say that income (non super) is free of tax up to $18k.

That said, does that mean I could receive up to $18k from dividends for example outside of super AND withdraw say $22k a year from my super and pay no tax ?. OR is it that even though the super funds are tax free, they are still seen as income and the $18k from the dividends are now taxable ?

[mjr]

The former. Money from super is tax free and doesn't impact your regular income tax-free threshold.

[Latestarter55]

mjr ... thanks .... and its the correct answer :-)

[marty998]

People think since they are forced to withdraw a certain % from their super once they start a pension then they MUST spend it all.

Blind spot is not realising that you can still invest outside super at any age...

[deborah]

Second blind spot is that you can still invest it in super until you are 65 anyway. Withdrawing it from super and immediately putting it back can have additional benefits.

[lush]

..... Withdrawing it from super and immediately putting it back can have additional benefits.

Deborah could you kindly elboarte on on this?

[marty998]

..... Withdrawing it from super and immediately putting it back can have additional benefits.

Deborah could you kindly elboarte on on this?

It's funny whenever the prospect of "death taxes" is raised in Australia. People don't realise that we already have one.

It's all to do with the taxable and non-taxable components of your superannuation balance.

Your taxable component is made up of concessional contributions (the 9.5% + salary sacrificed amounts) + investment earnings.

Your non-taxable component is made up of non-concessional contributions.

This matters hugely when you die, and your benefits are paid to a non-dependent (e.g. an adult child). The taxable component of the balance is taxed at 15%. The non-taxable component is not taxed again, because think about it - it's your after tax money that you've contributed and are being handed back.

By withdrawing benefits and re-contributing them as non-concessional contributions, you increase the non-taxable component of your super and decrease the taxable component.

This strategy is quite easily implemented with an SMSF, but can still be done with a retail or industry fund.

[lush]

..... Withdrawing it from super and immediately putting it back can have additional benefits.

Deborah could you kindly elboarte on on this?

It's funny whenever the prospect of "death taxes" is raised in Australia. People don't realise that we already have one.

It's all to do with the taxable and non-taxable components of your superannuation balance.

Your taxable component is made up of concessional contributions (the 9.5% + salary sacrificed amounts) + investment earnings.

Your non-taxable component is made up of non-concessional contributions.

This matters hugely when you die, and your benefits are paid to a non-dependent (e.g. an adult child). The taxable component of the balance is taxed at 15%. The non-taxable component is not taxed again, because think about it - it's your after tax money that you've contributed and are being handed back.

By withdrawing benefits and re-contributing them as non-concessional contributions, you increase the non-taxable component of your super and decrease the taxable component.

This strategy is quite easily implemented with an SMSF, but can still be done with a retail or industry fund.

Yet another super gem I wasn't aware of! Thanks Marty.

[deborah]

This discussion would not be complete without talking about the small number of people (mainly public servants, although there are some others) whose superannuation includes an “untaxed” component. We all know that the government decided not to set aside all its superannuation obligations, thus creating a hole in the funding of public service pensions. And that they subsequently set up the future fund to address the problem.

However, people who have such pensions have a third component (Marty mentioned the other two) - untaxed. If you have superannuation that includes this component, your do pay tax when you receive your superannuation pension, on the “untaxed” component.