A: Thanks for the question.

When you turn 55 and take money out of super (presumably as a pension), it will be taxed as follows:

1. The tax free component will be tax free (this generally represents the return of your non-concessional contributions);


2. The taxable element will be taxed at your marginal rate. You will then be entitled to a 15% tax offset (the taxable element represents your concessional contributions, plus the earnings of the fund).

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For example, say your super balance is $300,000 – and you commence a transition to retirement pension. You take out the minimum – or 4% - $12,000.

Let’s assume that of your super balance, 10% is a tax free component, and 90% is a taxed element.

This means that of your $12,000 pension - $1,200 will be tax free, and $10,800 will count as the taxed element.

So, the tax you will pay:

$1,200 – tax free.

$10,800 – taxed at your marginal rate (added to your taxable income).

Against this, you will have a tax offset of 15% of $10,800 – or $1,620

Hope this helps.