Tax and your Defined Benefit
Please note:
CSC does not 'tax' your benefits. We are required to withhold amounts in accordance with Australian Taxation Office (ATO) guidelines. We do not have access to ATO-held information about your super interests with other funds. Any amounts listed on our Benefit Estimates do not take your personal financial circumstances into account, including current or previous super income which may lead to additional tax being imposed by the ATO after it is paid. You should seek independent tax advice from an accountant or appropriately qualified tax professional—we cannot provide individual tax advice.
Fund rules differ
Select your fund to view the details
- CSS
- DFRDB
- MilitarySuper
- PSS
How super is taxed
Generally, super may be taxed when:
Contributions are paid into a fund
Investment earnings are attributed to a benefit
Benefits are paid from a fund
If you are a high income earner or have exceeded a contributions cap, you may have other taxes to pay.
For more information about the tax implications of exceeding your contributions cap, visit the ATO.
Tax components of your super
The tax on your benefit will depend on your age and the source of the contributions to your super account before conversion to a benefit.
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Tax-free component
The tax-free component is your basic and supplementary member contributions paid after 1 July 1983 from your after-tax salary, any super co-contributions, and any tax-free components included in rollovers from other funds.
It may also include a pre-1 July 1983 taxed component if your eligible service started before 1 July 1983.
If your benefit is paid as a lump sum, any pre-1 July 1983 untaxed component will also be tax-free.
Generally, you don’t pay tax on the tax-free component of your benefit.
If you take part of your benefit as a pension and/or lump sum, payments may include tax-free and taxable components in the same proportion as they exist in the total benefit. This is the proportioning rule.
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Taxable taxed component
The taxable taxed component is part of your benefit from a taxed source. This is your:
- post-June 1990 productivity;
- fund earnings; and
- any rollovers from other super funds.
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Taxable untaxed component
The taxable untaxed component is part of your benefit from an untaxed source. This is your:
- unfunded Employer Benefit; and
- any pre-July 1990 productivity and fund earnings.
Lump sums
If you take part of your benefit as either a pension and/or lump sum, these may include both tax-free and taxable components in the same proportions as they exist in your total benefit.
The table outlines the tax treatment of lump sums.
| Age | Tax-free | Taxable taxed | Taxable untaxed | |
|---|---|---|---|---|
| Under preservation age | 0% | 20% plus the Medicare levy | 30% plus the Medicare levy. Top marginal rate for amounts over the untaxed plan cap amount. | |
| 60 and over | 0% | 0% | 15% plus the Medicare levy. Top marginal rate for amounts over the untaxed plan cap amount. | |
*The low rate cap is indexed annually. For the 2024–25 financial year the cap is $245,000. The low rate cap limits the amount of taxable components (taxed and untaxed elements) of a super lump sum that can receive a lower (or nil) rate of tax. This cap applies to members who have reached their preservation age but are not age 60.
#The untaxed plan cap limits the concessional tax treatment of benefits that have not been subject to contributions tax in the super fund. For the 2024–25 financial year the cap is $1,780,000. For information about the low rate cap or the untaxed plan cap in later years, visit the ATO.
Pensions
Defined Benefit pensions are subject to normal pay as you go (PAYG) tax deductions in the same way your salary is subject to regular tax deductions. However, you may be eligible to receive tax concessions or offsets.
The table outlines the tax treatment of pensions. The Medicare levy is applied where tax is deducted at your marginal tax rate.
| Age | Tax-free | Taxable taxed | Taxable untaxed |
|---|---|---|---|
| Under preservation age | 0% | Marginal tax rate plus the Medicare levy | Marginal tax rate plus the Medicare levy |
| 60 and over | 0% | 0% | Marginal tax rate plus the Medicare levy less a 10% offset |
*A tax offset of 15% is applied if the pension is a Disability Super Benefit.
#The tax concessions on your pension are limited to Defined Benefit amounts less than the Defined Benefit Income Cap, which is $118,750 per annum for the 2023–24 financial year. For this purpose, any benefits from a taxed source are considered first, followed by benefits from an untaxed source. 50% of any benefits from a taxed source that is more than $118,750 per annum will be counted as assessable income. Any untaxed benefit that exceeds $118,750 per annum will not be eligible for a 10% tax offset.
The amount of tax offset you can claim on your untaxed income is generally limited to $11,875 for the 2023–24 financial year. To work out the amount you can claim, use the ATO Defined Benefit Income Tax tool. For more information visit the ATO.
Tax offsets
A tax offset reduces the tax you pay on your taxable income, e.g. an offset of 10% to a benefit. It is different from a tax deduction, which reduces your assessable income.
When you turn 60, we’ll automatically apply the 10% offset on the taxable untaxed component of your fortnightly pension.
You must tell us in writing if you want to claim the offset as part of your annual tax return (instead of your fortnightly pension).
Any benefits from a taxed source are considered first, followed by benefits from an untaxed source.
Any untaxed benefit that exceeds the Defined Benefit Income Cap is not eligible for a 10% tax offset.
Tax offset age 60 and over
The untaxed component of Lucy’s fortnightly pension is $1,600. The 10% offset of $1,600 is $160. Deduct the $160 offset from the marginal tax rate applicable to Lucy’s pension. If Lucy’s fortnightly pension tax is $230, her new tax liability is $70.
Marginal tax rates and your taxable income
Marginal tax is the rate of tax for an additional dollar of income. Different rates of tax (tax brackets) apply based on income thresholds. Your whole income is not taxed at the next rate, only the amount that is over the threshold is taxed at that rate. Rates are set by the ATO.
We use marginal tax rates to calculate your withholding amount. Pay as you go (PAYG) withholding is the withholding of tax from payment instalments or an individual—in anticipation of their end of financial year tax liability. We withhold tax at rates set by the ATO.
Contribution phase
Tax treatment of your super while you are in your contribution phase.
Rollovers
Benefits rolled over from another super fund are not taxed at the time of the rollover—unless the amount includes components from an untaxed source. Untaxed components up to the untaxed plan cap amount of $1,780,000 are taxed at 15% for the 2023–24 financial year.
Investment earnings
Investment earnings are taxed at concessional rates up to 15% as CSC is a complying super fund (i.e. an approved super fund that qualifies for concessional tax treatment). The effective rate of tax incurred may be less than 15% due to the concessional tax treatment afforded to long-term capital gains and franking credits.
Supplying your tax file number (TFN)
Under the Superannuation Industry (Supervision) Act 1993, we are authorised to collect, use and disclose your TFN. We may disclose your TFN to another super provider when we transfer your benefits—unless you tell us in writing that your TFN not be disclosed to any other super provider.
Declining to quote your TFN to us is not an offence, however supplying your TFN will have the following advantages:
- we can accept all permitted types of contributions to your account/s;
- you will pay the amount of tax appropriate for your income (we will not withhold more each fortnight—but if we do withhold too much, you will get it back after submitting your tax return); and
- it will make it much easier to find different super accounts in your name so that you receive all your super benefits when you retire.
The purposes of supplying your TFN and the consequences of choosing not to supply your TFN may change in line with future legislative changes.
We intend to use your TFN only for these approved legislative purposes:
- advising the ATO for the purposes of validating your TFN, tax and super co-contributions;
- supplying your TFN to another fund if your benefit is transferred or rolled over (unless you tell us in writing that this not be done); and
- searching for and consolidating your benefits in your fund.
Temporary residents and lost members
We are obligated to pay the unclaimed super of a non-resident to the Commissioner of Taxation under Division 3 of Part 3A of the Superannuation (Unclaimed Money and Lost Members) Act 1999.
We rely on an ASIC exemption to not notify or provide an exit statement to a former temporary resident.
Former temporary residents can apply to the Commissioner of Taxation for unclaimed super under Division 4 of Part 3A of that Act.