Ask the expert: Paying tax on your super

I AM 62 years of age and have recently retired permanently. I have about $700,000 in super. Will I have to pay any tax on this balance if I convert it into a pension? I heard the earnings are tax free when in the pension phase.

Answer this week provided by Adam Crabbe from AMP Financial Planning, a member of the Financial Planning Association.

Congratulations on your recent retirement.

Looking at the first part of your question, there are a handful of super funds in the market today which are taxed when it comes time to access your super, for example state and Commonwealth public superannuation schemes. This occurs when the super fund contains an “untaxed” element and is taxed on either lump-sum withdrawals or when taken as a pension.

You should also check that your super provider has received and applied your tax file number. If not, you may be liable for a tax bill later, even if your super does not have an untaxed element.

Regarding the second question, yes you’re right. As you’re over 60, if your income stream contains no untaxed element, then both the earnings within the investment and the pension payments you receive are tax free. In fact, recent changes now mean that you won’t receive a payment summary so there is no need to disclose the income on a tax return.

Where to find out more

To find a financial planner, call the FPA on 1300 626 393 or visit www.goodadvice.com.au.

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