Schedule 13 – Tax table for superannuation income streams
This document is a withholding schedule made by the Commissioner of Taxation in accordance with sections 15-25 and 15-30 of Schedule 1 to the Taxation Administration Act 1953 (TAA). It applies to withholding payments covered by paragraph 12-80(a) of Schedule 1 to the TAA.
Using this table
You should use this table if you make a payment of a super income stream, including:
■ account-based super income streams – including death benefit income streams
■ capped defined benefit income streams – including death benefit income streams
■ transition to retirement income streams
■ temporary or permanent disability super income streams.
Super income streams
A super income stream is a series of regular payments from a superannuation provider when the payee has satisfied a condition of release. These regular payments can be paid weekly, fortnightly, monthly, quarterly, or annually.
A super income stream may be:
■ an account-based super income stream
■ a capped defined benefit income stream which include a
lifetime pension, regardless of when it started
lifetime annuity that existed prior to 1 July 2017
life expectancy pension or annuity that existed prior to 1 July 2017
market-linked pension or annuity, that existed prior to 1 July 2017.
Note: a commutation of an income stream is not a super income stream payment. It is a super lump sum.
Defined benefit income cap
The general defined benefit income cap is $100,000 and is subject to indexation. The defined benefit income cap may be reduced below $100,000, depending on the payee's circumstances.
■ Conditions of release
■ Taxation Ruling TR 2013/5: When a super income stream commences and ceases
■ Tax table for superannuation lump sums
■ Super changes
■ Super changes for APRA-regulated funds
■ Varying your PAYG withholding
Components of a super income stream
Before you can work out the withholding amount, you must calculate the components of the super income stream.
A super income stream may have two components:
■ taxable component which can include either or both of an
– element taxed in the fund (taxed element)
– element untaxed in the fund (untaxed element).
■ tax-free component.
The answers your payees provide on their Tax file number declaration determine the amount you need to withhold from their payments. A Tax file number declaration applies to any payments made after you receive the declaration. If you receive an updated declaration from a payee, it will override the previous one.
If a payee does not give you a valid Tax file number declaration within 14 days of starting a payer/payee relationship, you must complete a Tax file number declaration with all available details of the payee and send it to us.
You must withhold 47% for residents, and 45% for foreign residents, if a super income stream payment is made to your payee and they:
■ have not quoted their TFN
■ have not claimed an exemption from quoting their TFN
■ have not advised you they have applied for a TFN, or have made an enquiry with us.
If a payee states at question 1 of the Tax file number declaration they have lodged a Tax file number – application or enquiry for individuals with us, they have 28 days to provide you with their TFN.
If the payee has not given you their TFN within 28 days, you must withhold 47% from any payment you make to a resident payee and 45% from a foreign resident payee from the relevant element(s) of the taxable component of the super income stream payment (ignoring any cents) unless we tell you not to.
Do not allow for any tax offsets, or Medicare levy adjustments. Do not withhold any amount for:
When not to apply the no-TFN withholding rate
Do not apply the no-TFN withholding rate:
■ to the tax-free component, or taxed element of a capped defined benefit income stream, where the payee is 60 years old or over and the total of these amounts is below their defined benefit income cap
■ to the taxed element of an account-based super income stream where the payee is 60 years or over.
In these circumstances no withholding is required.
Example:Heather is 85 and is in receipt of a capped defined benefit income stream from a fully funded defined benefit fund for the full year. Heather's super fund does not have her TFN. As Heather is receiving an income stream from a fully funded defined benefit fund with an annual entitlement of $80,000, her super fund does not apply the no-TFN withholding rate.
Factors to consider when working out the withholding amount include:
■ whether the payee is an Australian resident or foreign resident for tax purposes
■ the age of the payee
■ the frequency of the super income stream payments – for example, fortnightly, monthly
■ whether the payee is claiming the tax-free threshold
■ whether the payee is claiming the seniors and pensioners tax offset
■ whether the payee is receiving a disability super income stream
■ whether the super income stream includes an untaxed element (generally payments from state and Commonwealth public sector super schemes)
■ the type of super income stream
■ whether the total of the taxed elements and tax-free component is greater or less than the defined benefit income cap (the Cap)
■ whether the defined benefit income cap should be reduced
■ whether the income stream is a super death benefit income stream.
Payments to Australian residents
This schedule is divided into five parts. The amount required to be withheld from a super income stream is dependent on the type of super income stream you pay.
■ Account-based super income stream – use part A
■ Capped defined benefit income stream and
\- payee is under 60 years old at any time during the financial year, including
disability super income streams
death benefit (including reversionary) income streams where the deceased was aged less than 60 – use part A
(Note: where the payee turns 60 during the year you will need to complete part E for post 60 income stream payments)
\- payee turns 60 years old during the financial year or starts their super income stream part way through the year at age 60 or older – use part E for post 60 income stream payments.
\- payee is 60 years old or over for the full financial year
a taxable component – taxed element and or a tax-free component – use part B
a taxable component – untaxed element only – use part C
a mixture of the above components – use part D
\- payee is under 60 years old, and is in receipt of a death benefit (reversionary) capped defined benefit income stream and the deceased was 60 years old or older at the time of death – use part E
Payments to foreign residents
If the super income stream is to be made to a foreign resident, you will need to check if there is a tax treaty with their country of residence. If the super income stream is assessable in the other country because of the treaty, no withholding is required.
If a foreign resident's super income stream is assessable in Australia, you are required to withhold from the payment.
■ The full list of Australian Tax Treaties, as maintained by Treasury
Ignore any cents in an income stream before using any of the steps in this schedule to calculate withholding. Withholding amounts calculated using the steps are rounded to the nearest dollar. Results ending in exactly 50 cents are rounded to the next highest dollar. Do this rounding directly – do not make a preliminary rounding to the nearest cent. Where no TFN has been provided, cents are ignored when withholding amounts are calculated.
Part A
Use this part where the payee is:
■ below 60 years of age and is receiving a super income stream
■ 60 years of age or over and is receiving a super income stream that is not a capped defined benefit income stream with an untaxed element.
Note: if the payee turns 60 during the financial year and is in receipt of a capped defined benefit income stream, then you will also need to complete part E for post 60 income stream payments.
Taxable component contains taxed and untaxed elements
Step 1: Use the following table to work out which elements of the taxable component withholding applies to.
How to apply withholding when taxable component contains untaxed element
Note: Do not withhold where the payee is receiving an account-based super income stream with a taxed element and tax-free component and is aged 60 years or older.
Step 2: Use the appropriate PAYG withholding tax table to calculate the withholding amount relevant to the amount worked out in step 1. The tax table you use depends on the period the super income stream covers – that is, weekly, fortnightly or monthly.
Note: Some payees aged 60 years or over may be eligible to claim the seniors and pensioners tax offset (SAPTO). If the payee gives you a Withholding declaration indicating they want to claim a SAPTO entitlement through PAYG withholding, you should use the Tax table for seniors and pensioners to work out the amount to withhold from the amount calculated in step 1.
Step 3: Some payees may be eligible for a tax offset. Use the following table to work out the tax offset amount for the payee.
Super income stream – taxable component
Age
Tax offset
Below preservation age
Nil
Preservation age to under 60 years old
Taxed element × 15%Untaxed element – Nil
60 years or over
Untaxed element x 10%
Disability super income stream – taxable component
Age
Tax offset
Below preservation age
Taxed element × 15%Untaxed element – Nil
Preservation age to under 60 years old
Taxed element × 15%Untaxed element – Nil
60 years or over
Untaxed element x 10%
Step 4: For some payees, the application of the offset from step 3 leads to under withholding for their Medicare levy. An offset adjustment is required where the tax offset calculated in step 3 is greater than zero. Use the applicable formulas below to calculate the offset adjustment amount. You will need to calculate the weekly equivalent of the taxable component or untaxed element if making fortnightly, monthly or quarterly payments. If an offset adjustment is not required set the offset adjustment to zero.
Adjustment amounts per taxable component amount
Medicare levy parameters are contained in Statement of formulas for calculating amounts to be withheld
Step 5: Calculate the notional amount to withhold by first subtracting the tax offset per payment (step 3) from the withholding amount (step 2).
Notional amount to withhold = withholding amount − tax offset
Then compare the notional amount to withhold with the offset adjustment amount calculated at step 4.
If the notional amount to withhold is:
■ less than the amount calculated at step 4, withhold the amount calculated at step 4
■ more than the amount calculated at step 4, withhold the notional amount to be withheld.
Tax-free component
If the super income stream is being paid to a payee under 60, you do not need to consider their tax-free component when calculating their withholding.
Example:This example uses the PAYG withholding tax tables that apply from 1 July 2018.Case A: Payee is under 60 years oldMaree, 57, receives a fortnightly super income stream of $1,200 comprising:■ a tax-free component of $300■ a taxable component – taxed element of $900.Maree’s preservation age is 57.Step 1: Maree is 57 years old therefore withholding applies to the taxable component.Step 2: As Maree is paid fortnightly, use the Fortnightly tax table to work out the withholding required from the $900 taxed element. This amount is $42, assuming that Maree is claiming the tax-free threshold.Step 3: Maree is entitled to a tax offset.Tax offset = taxed element × 15%= $900 × 15%= $135Step 4: Calculate Maree’s fortnightly offset adjustment amount. As Maree’s fortnightly payment is more than $844 (the Medicare levy threshold for singles, on a fortnightly basis) but less than $1,056 (the Medicare levy SOP for singles, on a fortnightly basis), her offset adjustment amount is calculated as:Offset adjustment amount = (Taxable component – Medicare levy threshold for singles) × 0.10= ($900 – $844) × 0.10= $5.60= $6 per fortnight (rounded to the nearest dollar)Maree’s offset adjustment amount is $6 per fortnight.Step 5: To calculate the notional withholding amount, reduce the withholding amount ($42 as worked out in step 2) by the value of the tax offset ($135 as worked out in step 3). That is:Notional withholding amount = $42 − $135 = −$93Since the notional withholding amount is negative and less than the offset adjustment amount, the amount to be withheld from Maree’s fortnightly super income stream is $6. This is the offset adjustment amount which will cover the Medicare levy payable.
Part B
Use this part if the payee is receiving a capped defined benefit income stream during the year and is:
■ 60 years old or over and
■ their super income stream is made up of
– tax-free component
– taxable component – taxed element
– tax-free component and the taxable component – taxed element.
Step 1: Convert the super income stream components the payee received the period to an annualised amount and use the following table to work out whether withholding applies, and if so, what amount it applies to.
Income stream components
Does withholding apply?
Sum of the annualised tax-free component and taxed element is less than the Cap
No withholding applies. No further steps are necessary.
Sum of annualised tax-free component and taxed element is greater than the Cap
Withholding applies to 50% of the amount over the Cap. Go to step 2.
Step 2: Calculate the weekly, fortnightly or monthly equivalent of the amount from step 1 in excess of the Cap. For example, if you pay the payee weekly divide the excess by 52. If you pay fortnightly divide the excess by 26. If you pay monthly divide the excess by 12 (ignore cents in the result).
Step 3: Divide the amount calculated at step 2 by two (ignore cents in the result).
Step 4: Use the appropriate PAYG withholding tax table to calculate the withholding amount relevant to the amount worked out in step 3. The tax table you use depends on the period the income stream covers – that is, weekly, fortnightly or monthly.
Example: Case B (i): Capped defined benefit income stream where the annual entitlement is under the CapCourtney, 61, receives a fortnightly capped defined benefit income stream of $2,000 comprising of:■ a tax-free component of $200■ a taxable component – taxed element of $1,800.Courtney is entitled to the full defined benefit income cap amount of $100,000 as there are no factors present that reduce this cap. The annual equivalent of Courtney's fortnightly super income stream ($52,000) is less than the defined benefit income cap of $100,000. As Courtney is over 60 years old and her capped defined benefit income stream is comprised wholly of a taxed element and tax-free component of less than $100,000 for the income year, no withholding is required.
Example: Case B (ii): Capped defined benefit income stream where the annual entitlement exceeds the CapBill, 63, receives a fortnightly capped defined benefit income stream of $5,550 comprising of:■ a tax-free component of $550■ a taxable component – taxed element of $5,000.Bill is entitled to the full defined benefit income cap amount of $100,000 as there are no factors present that reduce this capStep 1 The annual equivalent of Bill's fortnightly capped defined benefit income stream is made up of an annualised tax-free component of $14,300 and annualised taxed element of $130,000 totalling $144,300 which is greater than the defined benefit income cap of $100,000. Withholding applies to 50% of the amount over the Cap. Go to step 2.Step 2 Calculate the fortnightly equivalent of the amount in excess of the Cap.$144,300 − $100,000 = $44,300Bill is paid fortnightly, therefore:$44,300/ 26 = $1,703 (ignoring cents)Step 3 Divide the amount calculated at step 2 by two.$1,703/ 2 = $851 (ignoring cents)Step 4 Use the Fortnightly tax table to calculate the withholding amount relevant to the amount worked out in step 3.As Bill has claimed the tax-free threshold the withholding amount is $28.
Part C
Use this part if the payee is receiving a capped defined benefit income stream and:
■ is 60 years old or over, and
■ their income stream is only made up of a taxable component – untaxed element.
Step 1: Use the appropriate PAYG withholding tax table to calculate the withholding amount relevant to this pay period's taxable component – untaxed element. The tax table you use depends on the period the income stream covers – that is, weekly, fortnightly or monthly.
Note: Some payees may be eligible to claim the seniors and pensioners tax offset (SAPTO). If the payee gives you a Withholding declaration indicating they want to claim a SAPTO entitlement through PAYG withholding, you should use the Tax table for seniors and pensioners to work out the amount to withhold from the amount calculated in step 1.
Step 2: Determine the tax offset for the payment
Convert the untaxed element the payee received this period to an annualised amount. Use the following table to work out the amount of tax offset that applies.
Untaxed element – annualised amount
Tax offset
Equal to or greater than the Cap
Tax offset is capped at 10% of the Cap.
Less than the Cap
Tax offset is calculated at 10% of the untaxed element.
Step 3:
If the annualised amount from step 2 is less than the Cap then:
Tax offset = Untaxed element for the payment ×10%
If the annualised amount from step 2 is greater than the cap then the annual tax offset is capped at 10% of the cap. Therefore, the tax offset for the payment is reduced to the weekly, fortnightly or monthly equivalent of the capped tax offset amount.
Step 4: Work out the amount to withhold by subtracting the tax offset per payment (step 3) from the withholding amount (step 1).
Amount to withhold = withholding amount − tax offset
If the tax offset amount is greater than the withholding amount, the amount to withhold is nil.
Example: Case C: Capped defined benefit income stream comprised of a taxable component – untaxed element onlyThis example uses the PAYG withholding tax tables that apply from 1 July 2018.Vera, 68, receives a weekly super income stream of $2,000 comprised only of a taxable component – untaxed element.Step 1 Using the Weekly tax table, the withholding amount relevant to the taxable component – untaxed element for $2,000 is $541 (Vera has claimed the tax-free threshold).Step 2 The annual equivalent of Vera's weekly super income stream untaxed element ($2,000 × 52 = $104,000) is greater than the defined benefit income cap of $100,000. Therefore, Vera's tax offset is capped at $10,000 for the financial year.Step 3 As Vera is over 60 years old she is eligible for a 10% tax offset of the untaxed element.The tax offset amount is capped at $10,000. This weekly offset amount exceeds this cap ($200 × 52 = $10,400). Therefore, the tax offset is reduced to the weekly equivalent of the $10,000 annual capped amount.Weekly tax offset = $10,000 / 52 = $192 (ignore cents)Step 4 Work out the amount to withhold by subtracting the tax offset per payment (step 3) from the withholding amount (step 1).Amount to withhold = withholding amount − tax offset= $541 − $192= $349
Part D
Use this part where the payee is receiving a capped defined benefit income stream and:
■ is 60 years old or over, and
■ their income stream is made up of one or more of
– tax-free component and/or taxable component – taxed element
– taxable component – untaxed element.
Work out the amount subject to withholding
Step 1: Convert all of the components of the whole income stream the payee received during this period to an annualised amount.
Then add together all the annualised components that make up the income stream to determine whether you go to step 2 or part C.
Step 2: Add the annualised tax-free component and annualised taxed element. Subtract the cap from this amount. If this is less than the cap, go to step 5.
Step 3: Calculate the weekly, fortnightly or monthly equivalent of the amount at step 2. For example, if you pay the payee weekly divide the excess by 52. If you pay fortnightly divide the excess by 26. If you pay monthly divide the excess by 12 (ignore cents in the result).
Step 4: Divide the amount calculated at step 3 by two (ignore cents in the result). The result is the amount subject to withholding.
Step 5: Calculate the weekly, fortnightly or monthly equivalent of the untaxed element and add this to the amount calculated at step 4 (if applicable).
Step 6: Use the appropriate PAYG withholding tax table to calculate the withholding amount relevant to the amount worked out in step 5. The tax table you use depends on the period the income stream covers – that is, weekly, fortnightly or monthly.
Calculate the tax offset applicable
Step 7: If the sum of the annualised tax-free component and the annualised taxed element is equal or greater than the cap then the payee is not entitled to a tax offset.
If the sum of the annualised tax-free component and the annualised taxed element is less than the cap, the payee is entitled to a reduced tax offset. Subtract from the cap the sum of the tax-free component and the taxed element from step 2 and apply 10% to this amount. The result is the annual tax offset amount.
Calculate the weekly, fortnightly or monthly equivalent of this tax offset. For example, if you pay the payee weekly divide the amount by 52. If you pay fortnightly divide the amount by 26. If you pay monthly divide the amount by 12 (ignore cents in the result).
Work out the amount to withhold
Step 8: Subtract the tax offset per payment (step 7) from the withholding amount (step 6).
Amount to withhold = withholding amount − tax offset
Example:Case D (i): Payee is over 60 years old and receives all elements of a capped defined benefit income streamNancy, 75, receives a capped defined benefit income stream for the financial year of $212,000 comprising of the annualised:■ taxable component – taxed element $120,000■ taxable component – untaxed element $62,000■ tax-free component $30,000.Nancy is paid weekly and claims the tax-free threshold.Work out the amount subject to withholdingStep 1.Add together all the annualised components.$120,000 + $62,000 + $30,000 = $212,000As the sum is over the $100,000 Cap, proceed to step 2.Step 2 Add together the tax-free component and taxed element. Subtract the $100,000 cap from this amount.Sum of tax-free component and taxed element$120,000 + $30,000 = $150,000Amount in excess of cap$150,000 − $100,000 = $50,000Step 3 Calculate the weekly equivalent of the amount in excess of $100,000 calculated at step 2.$50,000/ 52 = $961 (ignore cents)Step 4 Divide the amount calculated at step 3 by two.$961/ 2 = $480 (ignore cents)Step 5 Calculate the weekly equivalent of the untaxed element of the taxable component $1,192 ($62,000/52) and add it to the amount calculated at step 4 ($480).$1,192 + $480 = $1,672Step 6 Using the Weekly tax table, the withholding amount relevant to the amount calculated in step 5 is $415.Calculate the tax offset applicableStep 7 Determine any entitlement to the tax offset. As the sum of Nancy's taxed element and tax-free component is over $100,000 she is no longer eligible for a tax offset for the untaxed element.Work out the amount to withholdStep 8 Amount to withhold = withholding amount (step 6) − tax offset (step 7)= $415 − 0Total amount to withhold is $415.
Example:Case D (ii):Fred, 68, receives a capped defined benefit income stream (annualised) for the full financial year of $115,000 comprising of:■ taxable component – taxed element $82,000■ taxable component – untaxed element $23,000■ tax-free component $10,000.Fred is paid fortnightly and claims the tax-free threshold.Work out the amount subject to withholdingStep 1 Add together all the components.$82,000 + $23,000 + $10,000 = $115,000As the sum is over the $100,000 Cap, proceed to step 2.Step 2 Add together the tax-free component and taxed element. Subtract the $100,000 Cap from the result.Sum of tax-free component and taxed element.$10,000 + $82,000 = $92,000Amount in excess of cap.$92,000 − $100,000 = – $8,000As $92,000 is less than $100,000 there is no excess amount.Step 3 & Step 4 These steps are not necessary as no excess amount was calculated at step 2.Step 5 Add the untaxed element of the taxable component $884 (i.e. fortnightly equivalent of $23,000) to the amount calculated at step 4 (Nil).$884 + Nil = $884Step 6 Using the Fortnightly tax table, the withholding amount relevant to the amount calculated in step 5 is $38.Calculate the tax offset applicableStep 7 As Fred's tax-free component and taxed element is less than the $100,000 Cap then he is entitled to a tax offset limited to the amount up to the Cap.Tax offset = ($100,000 − amount at step 2) × 10%($100,000 − $92,000) × 10% = $800The tax offset amount is capped at $800.As Fred is being paid on a fortnightly basis divide the offset by 26.$800/ 26 = $30 (ignore cents).Work out the amount to withholdStep 8 Amount to withhold = withholding amount (step 6) − tax offset (step 7)= $38 − $30Total amount to withhold is $8.
Example:Case D (iii):Bob, 70, receives a capped defined benefit income stream (annualised) for the full financial year of $210,000 comprising of:■ taxable component – taxed element $0■ taxable component – untaxed element $180,000■ tax-free component $30,000.Bob is paid weekly and claims the tax-free threshold.Work out the amount subject to withholdingStep 1 Add together all the components.$0 + $180,000 + $30,000 = $210,000As the sum is over the $100,000 Cap, proceed to step 2.Step 2 Add together the tax-free component and taxed element. Subtract the $100,000 Cap from this amount.$30,000 + $0 = $30,000$30,000 − $100,000 = −$70,000As $30,000 is less than the $100,000 Cap there is no excess amount.Step 3 & Step 4 These steps are not necessary as no excess amount was calculated at step 2.Step 5 Add the untaxed element of the taxable component $3,461 (i.e. weekly equivalent of $180,000) to the amount calculated at step 4 (Nil).$3,461 + Nil = $3,461Step 6 Using the Weekly tax table, the withholding amount relevant to the amount calculated in step 5 is $1,110.Calculate the tax offset applicableStep 7 As Bob's tax-free component is less than the $100,000 Cap then he is entitled to a tax offset limited to the amount up to the Cap.Tax offset = ($100,000 − amount at step 2) x 10%($100,000 – $30,000) × 10% = $7,000The tax offset amount is capped at $7,000As Bob is paid weekly divide the offset by 52.$7,000/52 = $134 (ignore cents)Work out the amount to withholdStep 8 Amount to withhold = withholding amount (step 6) − tax offset (step 7)= $1,110 − $134Total amount to withhold is $976
Part E
Use this part if the payee:
■ was 60 years old or older for the full financial year and they started their capped defined benefit income stream for the first time part way during the year [complete step 1(a)], or
■ turned 60 during the financial year and are in receipt of a capped defined benefit income stream [complete step 1(b)], or
■ was aged 59 years or younger for the full financial year and has capped defined benefit income stream that is a death benefit (reversionary) income stream where the deceased was aged 60 or over at the time of death [complete step 1(c)].
Note: If the payee is in receipt of multiple capped defined benefit income streams (maybe from multiple sources) or where the payee is in receipt of their own income stream at the same time as they are receiving a death benefit (reversionary) income stream then the reduction of the cap may not be correct in all circumstances.
Steps to reduce the defined benefit income cap
Step 1:
Use whichever is applicable to the payee's circumstances:(a) Work out the number of days from when you first paid a super income stream to 30 June 2019(b) Work out the number of days from your payee's birthday to 30 June 2019(c) Work out the number of days from when you first started to pay the reversionary income stream to 30 June 2019.Note: Make sure you include the day they turned 60 or the day the income stream starts in your calculations.
Step 2:
Days worked out from step 1 as a percentage of the year (number of days/365 x 100)
Step 3:
Multiply the general defined benefit income cap ($100,000) by step 2. The result is the payee's reduced defined benefit income cap.
Step 4:
Work out the withholding amount using the reduced defined benefit income cap. Refer to the examples for guidance.
Examples:Case E (i): Turning 60 during the financial yearOn 1 July 2018 Loraine was 59 years old receiving a capped defined benefit income stream for the full year. Loraine turns 60 on 12 September 2018. Loraine's income stream paid to her prior to turning 60 will be taxed according to part A.The character of this income changes when she turns 60 and therefore she will be subject to a different tax treatment on the income she receives after she turns 60.To calculate withholding on any payment made on or after Loraine's birthday, apply the steps outlined in this example.Loraine receives a fortnightly income stream of $5,200 for the full year made up of the following:■ a tax-free component of $400■ a taxable component – taxed element of $4,800.A. Work out Loraine's reduced defined benefit income cap for the 2019 financial year as follows:■ Step 1 Number of days from Loraine's birthday to 30 June 2019 is 292.■ Step 2 Step 1 result expressed as a percentage of the year: 292/365 = 80%■ Step 3 Multiply the general defined benefit cap by step 2 result: $100,000 × 80%.Loraine's reduced defined benefit income cap is $80,000.B. Annualise the components that make up Loraine's super income stream:■ a fortnightly tax-free component of $400. Annualised amount $10,400 ($400 x 26)■ a taxable component – taxed element of $4,800. Annualised amount $124,800 ($4,800 x 26)C. Add the annualised amounts of each component $10,400 + $124,800 = $135,200D. Work out the amount of income Loraine earned after she turned 60.Multiply the annual equivalent (step C) of Loraine's fortnightly super income stream by the percentage worked out at step 2. $135,200 × 80% = $108,160E. Work out the remaining fortnights in the financial year from when Loraine turned 60 that withholding applies: 292 days/14 days = 20F. Work out the withholding rate as follows:(i) Calculate the fortnightly equivalent of the amount in excess of her reduced cap of $80,000.$108,160 − $80,000 = $28,160Loraine is paid fortnightly, therefore:$28,160/ 20 (remaining fortnights) = $1,408 (ignoring cents)(ii) Divide the amount calculated at (i) by two.$1,408/ 2 = $704 (rounded to the nearest dollar)(iii) Use the Fortnightly tax table to calculate the withholding amount relevant to the amount worked out in (ii).As Loraine has claimed the tax-free threshold the withholding amount is $0.Note: You will need to provide a PAYG payment summary – superannuation income stream for payments made to the payee before turning 60 and a separate payment summary for payments made to the payee after turning 60, even if the withholding amount is zero.If a payee only had a untaxed element or a combination of all three elements then you will need to go to part C or part D respectively to work out the withholding after determining the reduced defined benefit income cap. However the following changes to certain steps in each of these parts will be required:■ Multiply step 2 of part C or step 1 of part D (the annualised amount) by the percentage of the financial year the payee is 60 years or over (the figure from step 2 in the Steps to reduce the defined benefit cap section). Use this figure in the relevant steps in part C or part D instead of the annualised amount.■ In step 2 of part B or step 3 and step 5 of part D, divide the relevant excess amount by the number of the relevant periods in the financial year since the payee turned 60 to the end of the financial year.■ In step 3 of part C and step 7 of part D, divide the relevant capped offset amount by the number of relevant periods in the financial year since the payee turned 60 to the end of the financial year.Case E (ii): Turning 60 during the financial year – income stream made up of other componentsUsing Loraine's circumstances from the previous example, if Loraine receives fortnightly income of $6,000 which was made up of $2,000 tax-free component, $3,000 taxed element and $1,000 untaxed element. Loraine turns 60 on the 12 September 2018.Step 1 Convert all of the components of the income stream to an annualised amount. Total income stream $6,000 x 26 = $156,000Taxed element $3,000 x 26 = $78,000Untaxed element $1,000 x 26= $26,000Tax-free component $2,000 x 26 = $52,000Step 2 Apply the percentage that Loraine was over 60 to the whole of the annualised income stream $156,000 x 80% = $124,800Step 3 From step 2 in part D add together the annualised tax-free component and taxed element $52,000 + $78,000 = $130,000Step 4 Subtract Loraine's reduced cap of $80,000 from $130,000. Result is $50,000Step 5 Divide the result in step 4 by the remaining fortnights $50,000/20 = $2,500 (ignore cents)Step 6 Divide the amount at step 5 by two. $2,500/2 = $1,250. Add Loraine's fortnight untaxed element amount $1,000. This totals $2,250. Using the Fortnightly tax table the withholding amount for $2,250 is $452.As Loraine's annualised tax-free component and taxed element is above her cap no tax offset is applicable.
Examples:Case E (iii): Starting an income stream during the financial yearSarah is 65 years old and she first starts her capped defined benefit income stream on 30 December 2018.Sarah's reduced defined benefit income cap for the 2019 financial year is worked out as follows:■ Step 1 Number of days from Sarah's first income stream payment to 30 June 2019 = 183■ Step 2 Step 1 result expressed as a percentage of the year: 183/365 = 50.137%■ Step 3 Multiply the general defined benefit cap by step 2 result: $100,000 × 50.137%Sarah's reduced defined benefit income cap is $50,137.Sarah’s income stream for the period between 30 December 2018 and 30 June 2019 comprises of a:■ taxable component – taxed element: $40,000■ taxable component – untaxed element: $20,000■ tax-free component: $15,000Sarah’s total income stream payments from 30 December 2018 are $75,000.Sarah is paid fortnightly and claims the tax-free threshold.As Sarah is paid fortnightly you will need to work out the remaining fortnights that withholding applies in the financial year from when the income stream commenced to be paid: 183 days/14 days = 13Work out the amount subject to withholdingStep 1 Add together all the annualised components.$40,000 + $20,000 + $15,000 = $75,000As the sum is over the $50,137 reduced Cap, proceed to step 2.Step 2 Add together the annualised tax-free component and taxed element. Subtract the $50,137 reduced cap from this amount.Sum the annualised tax-free component and taxed element$40,000 + $15,000 = $55,000Amount in excess of cap$55,000 − $50,137 = $4,863Step 3 Calculate the fortnightly equivalent of the amount in excess of $50,137 calculated at step 2 by using the number of remaining fortnights in the financial year from when the income stream commenced.$4,863/13 = $374 (ignore cents)Step 4 Divide the amount calculated at step 3 by two.$374/ 2 = $187 (ignore cents)Step 5 Calculate the fortnightly equivalent of the untaxed element of the taxable component using the remaining fortnights in the financial year from when the income stream started and add it to the amount calculated at step 4($20,000/13) + $187$1,538 + $187 = $1,725Step 6 Using the Fortnightly tax table, the withholding amount relevant to the amount calculated in step 5 is $270.Calculate the tax offset applicableStep 7 Determine any entitlement to the tax offset. As the sum of Sarah's taxed element and tax-free component is over $50,137, she is no longer eligible for a tax offset for the untaxed element.If Sarah were eligible you would apply the following:■ If the sum of the annualised tax-free component and taxed element is less than the reduced Cap, the payee is entitled to a reduced tax offset. Subtract from the reduced Cap the sum of the tax-free component and the taxed element from step 2 and apply 10% to this amount. The result is the tax offset amount the payee is entitled to for the financial year.■ Calculate the weekly, fortnightly or monthly equivalent of this tax offset amount for the remaining weeks, fortnights or months that withholding applies in the financial year from when the income stream commenced to be paid. For example, if the income stream started on 30 December 2018 and you pay the payee weekly divide the amount by 26. If you pay fortnightly divide the amount by 13. If you pay monthly divide the amount by 6 (ignore cents in the result).Work out the amount to withholdStep 8 Amount to withhold = withholding amount (step 6) − tax offset (step 7)= $270 − 0Total amount to withhold is $270.Case E (iv): Starting an income stream during the financial year – income stream does not include all componentsIf Sarah only had a tax-free component and/or a taxable component – taxed element or an untaxed element then you will need to go to part B or part C respectively to work out the withholding after determining the reduced defined benefit income cap. However the following changes to certain steps in each of these parts will be required:■ In step 1 of part B and step 2 of part C instead of converting the income stream payment to an annualised amount, use the Conversion table for income streams commencing during current financial year to work out the converted amount of the super income stream. Use this figure in the relevant steps in part B or part C instead of the annualised amount.■ In step 2 of part B, divide the relevant excess amount by the number of remaining periods in the financial year since the income stream started or the payee turned 60 to the end of the financial year. Use the Conversion table for income streams commencing during current financial year to work out the appropriate date.■ In step 3 of part C, divide the relevant capped offset amount by the number of remaining periods in the financial year since the income stream started or the payee turned 60 to the end of the financial year. Use the Conversion table for income streams commencing during current financial year to work out the appropriate date.
Example:Case E (v): Reversionary income where the payee is under 60 years old and the deceased was at least 60 years oldFreya, 57, receives a defined benefit income stream in her own right, and her income stream is taxed under part A of this schedule.Freya's partner died on 27 February 2019; Freya's partner was aged 61 at the time of death and was in receipt of a defined benefit income stream with both tax-free components and taxable components. Freya is now entitled to a reversionary income stream.As Freya's reversionary income stream was subject to concessional tax treatment, Freya's reversionary income stream is also subject to additional taxation arrangements.Freya's reduced defined benefit income cap for the 2019 financial year is worked out as follows:■ Step 1 Number of days from Freya's first income stream payment to 30 June 2019 is 124■ Step 2 Step 1 result expressed as a percentage of the year: 124/365 = 33.973%■ Step 3 Multiply the general defined benefit cap by step 2 result: $100,000 × 33.973%■ Freya's reduced defined benefit income cap is $33,973.Freya was also receiving a defined benefit income stream in her own right, her defined benefit income cap will be further reduced by the defined benefit income she received from the date of death of her partner.Freya is paid fortnightly and her own super income for the financial year is $70,000 which comprises of a:■ taxable component – taxed element $60,000■ taxable component – untaxed element $0■ tax-free component $10,000.Her income stream is also taxed under part A of this schedule.Reversionary Cap $33,973 − (0.33973 × $70,000).Freya's reduced Defined Benefit Cap is now $10,192 (rounded to the nearest dollar)Freya's Reversionary income stream comprises of a:■ taxable component – taxed element $30,000■ taxable component – untaxed element $10,000■ tax-free component $10,000.Freya's total reversionary income stream payment from 28 February 2019 is $50,000.Reversionary income in excess of the reduced cap of $10,192 is $39,808.Calculate Freya's withholding on her reversionary income streamUse part C to work out Freya's withholding amount, however you will need to work out the remaining fortnights in the financial year from when the income stream started, to apply the correct withholding as per previous examples.Step 1 Calculate the fortnightly tax-free component and taxed element in excess of the reduced cap.$40,000 − $10,192 = $29,808Freya is paid fortnightly from 28 February 2019, therefore:$29,808/8 = $3,726 (ignoring cents)Step 2 Divide the amount calculated at step 1 by two.$3,726/2 = $1,863 (ignoring cents)Step 3 Convert the untaxed element into fortnightly payments.$10,000/8 = $1,250Step 4 Add the amounts calculated at step 2 and step 3$1,863 + $1,250= $3,113Step 5 Use the Fortnightly tax table to calculate the withholding amount relevant to the amount worked out in step 4.Freya recognises that she has multiple taxable income streams and therefore has not claimed the tax -free threshold on her reversionary income stream payment, as such the withholding amount on $3,113 is $1,006.Step 6 As the reversionary income stream tax-free and taxed element components totalled more than Freya's reduced defined benefit income cap, she is not entitled to a tax offset.PAYG payment summary reportingFreya will receive two PAYG payment summaries – superannuation income stream:(1) PAYG payment summary – superannuation income stream(personal income stream)Applicable dates: 01/07/2018 – 30/06/2019Tax withheld $3,276Taxable component – taxed element $60,000Taxable component – untaxed element $0Tax-free component $10,000Tax offset $9,000(2) PAYG payment summary – superannuation income stream(reversionary income stream)Applicable dates: 28/02/2019 – 30/06/2019Tax withheld $8,048Taxable component – taxed element $30,000Taxable component – untaxed element $10,000Tax-free component $10,000As the source of this income stream was from an income stream that was subject to concessional tax treatment, no tax offset should be provided on the payment summary. The ATO will calculate any entitlement to a tax offset upon assessment.If Freya's circumstances were different:You would not reduce Freya’s defined benefit income cap and you would follow the steps in part B, part C or part D (as applicable) to calculate the withholding amount if:■ Freya was 60 years or over for the full financial year and was receiving the reversionary income stream for the full financial year, whether her husband died before or after he was 60, or■ Freya turns 60 during the financial year and her husband died aged 60 or over, and she was in receipt of the reversionary income stream for the full financial yearIf Freya was under 60 for the full financial year and Freya's husband had died before he turned 60, you would not reduce the defined benefit income cap and you would follow the steps in part A to calculate the withholding amount.If Freya was turns 60 during the financial year and her husband died aged under 60, and she was in receipt of the reversionary income stream for the full financial year, you would reduce the defined benefit income cap based on the date she turned 60 years of age and you would follow the relevant steps that are set out in the Lorraine examples to calculate the withholding amount.If Freya was 60 or over for the full financial year or turns 60 during the financial year, and she received the reversionary income stream for part of the year you would reduce the defined income cap based on either the day she turned 60 or the start of the income stream. You would follow the steps in part B, part C or part D (as applicable) to calculate the withholding amount. However the following changes to certain steps in each of these parts will be required:■ In step 1 of part B and step 2 part C or part D, instead of converting the income stream payment to an annualised amount, use the Conversion table for income streams commencing during current financial year to work out the converted amount of the super income stream. Use this figure in the relevant steps in part B, part C or part D instead of the annualised amount.■ In step 2 of part B or step 3 and step 5 of part D, divide the relevant excess amount by the number of remaining periods in the financial year since the income stream started or the payee turned 60 to the end of the financial year. Use the Conversion table for income streams commencing during current financial year to work out the appropriate date.■ In step 3 of part C or step 3 and step 5 in part D, divide the relevant capped offset amount by the number of remaining periods in the financial year since the income stream started or the payee turned 60 to the end of the financial year. Use the Conversion table for income streams commencing during current financial year to work out the appropriate date.
Super death benefits
Dependants
Dependants include all children of the deceased under 18 years old, any spouse of the deceased (including a former spouse and a current or former de facto spouse), and any person with whom the deceased had an interdependency relationship.
An interdependency relationship includes a close personal relationship between two people who live together, where one or both provides for the financial and domestic support and personal care of the other.
A dependant can also be a person who was financially dependent on the deceased. Before accepting that a person is financially dependent, phone us on 13 10 20.
Non-dependants
A person who is not a dependant of the deceased is not able to receive a super income stream from the deceased. A super death benefit income stream that was being paid to a non-dependant prior to 1 July 2007 is taxed in the same manner as a super death benefit income stream paid to a dependant.
Reversionary income streams
A death benefit income stream can either be a reversionary or non-reversionary. A death benefit (reversionary) income stream is a super income stream that reverts to the reversionary beneficiary automatically upon the member's death, if the death benefit payment is not a reversionary income stream then it is treated the same as if it was the member's income stream.
Defined benefit income cap
The defined benefit income cap is relevant if the payee is:
■ 60 years or over, or
■ under 60 years of age and a death benefits dependant, where the deceased died at 60 years of age or over.
The defined benefit income cap applies if the payee receives one or more superannuation income stream benefits that are 'defined benefit income' to which 'concessional tax treatment' applies. The defined benefit income cap does not have taxation consequences outside of these circumstances.
The defined benefit income cap is an annual cap that is reset, and may be reduced, each year. From 1 July 2017, the ‘defined benefit income cap’ limits the amount of tax-free income the payee can receive from a capped defined benefit income stream (pension or annuity).
For the 2019 financial year, the defined benefit income cap will be $100,000 (the $1.6 million general transfer balance cap divided by 16).
■ Law Companion Ruling LCR 2017/1.
The withholding amount varies depending on whether the payee has reached their preservation age when the payment is made.
Preservation age is determined using your payee’s date of birth. For example, if a member was born on 1 October 1961, they will reach their preservation age of 57 on 1 October 2018. The table below will help with this:
Preservation age by date of birth range
Cap conversion table
The full year cap on defined benefit income streams is $100,000 as of 1 July 2018, and is subject to indexation. The cap may also need to be reduced – see part E.
The table below converts the $100,000 cap into the weekly, fortnightly or monthly equivalent.
Total income stream
Annual amount less than $100,000
Annual amount $100,000 or greater
Weekly equivalent
$1 to $1,923
$1,924 or greater
Fortnightly equivalent
$1 to $3,846
$3,847 or greater
Monthly equivalent
$1 to $8,333
$8,334 or greater
Conversion table for income streams commencing during current financial year
The table below can be used to determine the period to use for calculating withholding for income streams that start during the financial year:
You must issue a PAYG payment summary – superannuation income stream to the member for the total of the payments made in the financial year. This must be provided by 14 July. This date may be earlier if the payee requests it.
Payment summaries can also be printed using software that conforms to our reporting specifications.
During the year that a payee turns 60, you must issue two separate payment summaries – one for the period prior to the payee turning 60 and one for the period from the payee's 60th birthday.
A payment summary is required to be issued to a payee in receipt of a super income stream even if no tax was withheld.
■ Payment summary information and reporting specifications on our Software developers website