Tax Time For Seniors in Australia
Tax time is here and it’s time to start preparing and lodging your tax return.
If you have retired and you’ve turned 60 in the last year you may be eligible for several tax concessions — even if you’re still working or earning an income from non-super benefits.
Tax offsets
Tax offsets directly reduce the amount of tax you must pay. Generally, a tax offset can only reduce the amount of tax you pay to zero and can be claimed when you lodge your tax return.
If you have reached the age pension age the senior Australians tax offset allows you to earn more money before you have to pay tax or the Medicare levy. There are a range of eligibility conditions which relate to age, income and eligibility for Australian Government pensions and payments.
The mature age worker tax offset encourages and rewards mature age workers who stay in the workforce by reducing the amount of tax they pay. If you’re an Australian resident, over 55 and still working you may be eligible for this offset.
Tax and your super
Super benefits may be paid to you as an income stream or lump sum. If you’re aged 60 or over and your only source of income is super benefits from a taxed source, you won’t need to lodge a tax return. However, you will have to lodge a tax return if you have income from other sources, including investments or some public service super funds.
Tax payable on super benefits depends on a number of things, including your age, the amount of the payment and whether your super comes from a taxed or untaxed source.
Some super benefits have a tax-free component and a taxable component. The tax-free component generally includes:
- amounts you have contributed to your super fund without claiming those amounts as a tax deduction, and
- certain other tax-free amounts you may have rolled into your super fund.
If you have reached your preservation age but you’re not yet 60 years old, any super lump sum you receive from a taxed source is taxed as follows:
- the taxable component of the benefit, up to the low-rate cap amount, is taxed at 0%, and
- the maximum rate of tax on the remainder of the taxable component is 15%, plus the Medicare levy.
If you have not reached your preservation age, the taxable component of any super lump sum you receive from a taxed source is taxed at a maximum rate of 20%, plus Medicare levy.
The taxable component of a super lump sum or super income stream is shown on your payment summary.
Remember preservation age is not the same as pension age. Pension age is when you become eligible for government pension benefits depending on your income and assets.
