Lifetime Pension Payments

PAYG taxation of pensions

PAYG tax is calculated and withheld (where applicable) from each pension payment made to you. It is calculated on a per payment basis. The following information is considered when these calculations are completed:

• The source of your pension – whether your pension is paid from a taxed or untaxed source
• The information you supplied on your ATO Tax File Number Declaration form
• Your age
• The amount of assessable income in each payment
• The relevant taxation tables that apply at the time that the payment is made

(Further information can also be found on the ATO website at www.ato.gov.au)

Important Note:

Rules apply for lifetime pensions if your gross annual pension is over $118,750* per year, or if you have over $1.9m* held in super pension products (including lifetime and account-based pensions). In these cases, additional tax may apply and we suggest you seek further financial advice. The information shown on this webpage applies if your gross annual pension is under $118,750* per year. *amounts applicable for 2024/25.

We have summarized the PAYG tax treatment of both taxed source and untaxed source pensions below. Please note ‘age 60’ refers to the government’s age-related pension access restrictions (not preservation age under the ElectricSuper Rules).

Pensions paid from a taxed source

These pensions are paid assuming that any applicable contributions tax has been paid on the underlying investments and concessional contributions. Your pension will be made up of a tax-free component (not assessable for PAYG tax purposes) and the balance of your payments are considered to be Taxable -Taxed (Source).

As a result, a pension paid from a taxed source has the following taxation components:

If you receive a TPD Pension and are aged under 60, a tax offset of 15% of the Taxable-Taxed Component is applied.

For example, if your tax free percentage was 50%, and your fortnightly pension was $1,000.00, then:

Pensions paid from an untaxed source

These pensions are paid assuming that any applicable contributions tax has not been paid on the underlying investments and concessional contributions. As a result, a pension paid from an untaxed source has the following taxation components:

(*For death benefits, the tax offset may apply irrespective of the pension recipient’s age.)

In the quote we supplied to you, we set out your Untaxed Percentage. This amount will apply to your pension payments, and the balance of your payment will be Tax Free. The details of the components applied to your payments are set out in your quote.

For example, if your Untaxed percentage was 90%, and your fortnightly pension was $1,000 then:

Changing the source of your pension

ElectricSuper’s Board currently has the discretion to offer each ElectricSuper lifetime pensioner the opportunity to change the source of their lifetime pension (that is. convert from a taxed source pension to an untaxed source, or vice versa). If a member requests such a change, it will generally take effect from the following 1 July, and apply for a minimum of 12 months. There is no fee to change the source of a lifetime pension.

Changing the pension source will affect the amount of PAYG tax deducted from your ElectricSuper pension payments, and may also affect the PAYG tax payable on income or benefits received from other sources (for example, Services Australia entitlements). If you are under age 60, the comparison will also change when you reach age 60.

Upon request, ElectricSuper can provide you (or your financial advisor) with a comparison quote which shows how your current pension benefits would change if you converted to the other source. Some information is unknown when we prepare your quote, so we may be unable to give you exact details of the PAYG tax payable should you elect to swap to the other source. However, your accountant or financial advisor should be able to help you to calculate these tax amounts using the information contained on this webpage.

If you are considering changing the source of your pension, we strongly suggest that you seek independent financial advice to see how this change will affect you.

If you wish to change the source of your lifetime pension (from taxed source to untaxed source, or vice versa), you can access the form to make the change here.

You must notify us of your intention to convert your pension source before 1 June for it to be effective the following financial year.

Services Australia Assessment

Services Australia considers these accounts to be a Defined Benefit Income Stream. When assessing your income, Services Australia require the following information:

• The gross payment per fortnight
• The tax free amount

Services Australia will apply the appropriate income test on the difference between the gross payment, and the tax free amount. For Services Australia purposes, the tax free amount is capped at 10%.

For example, if your fortnightly income payment was $1,000, and your tax free amount was $500, then:

Services Australia Tax Free Amount = $100 (10% of $1,000)

Services Australia Assessable income = $1,000 – $100 = $900

Sustainable Superannuation Reforms

We are required to report your income for the purposes of assessing any applicable Transfer Balance Amounts. Your assessment will be based on your overall superannuation position (that is, all superannuation accounts and income streams that you hold). ElectricSuper may be required to withhold additional amounts of PAYG, or you may be required to include amounts in your income tax returns. Both the Australian Taxation Office and ElectricSuper will contact you if this is the case.