Preservation Age
Generally, you must reach preservation age before you can access your super. Use the following table to work out your preservation age.
| Date of birth |
Preservation Age |
| Before 1 July 1960 |
55 |
| 1 July 1960 – 30 June 1961 |
56 |
| 1 July 1961 – 30 June 1962 |
57 |
| 1 July 1962 – 30 June 1963 |
58 |
| 1 July 1963 – 30 June 1964 |
59 |
| From 01 July 1964 |
60 |
Under 60 and Retired
If you are aged between Preservation Age and 59 and are "Retired", you pay no tax on your share of the SMSF income and realised capital gains once you commence a Retirement Phase Pension. Offsetting these tax savings is the tax that you pay on the Pension withdrawals from the SMSF. When you draw a Pension and are under 60, you are taxed on the "Taxable" portion of your Super Benefit and also receive a 15% "Pension Rebate" on the "Taxable" portion of the Pension accessed. You should obtain your own independent financial advice about which course of action is appropriate to your circumstances.
Case Study Example
Let's consider a Case Study demonstrating how much tax you can save by commencing a Retirement Phase Pension between Preservation Age and 59 when you are "Retired".
Example:
Barney is 59 and has recently "Retired". Barney has a Super benefit of $1,000,000. His Super Benefit is broken down into a "Taxable Component" of $800,000 (built up from Employer Contributions) and a Tax Free Component of $200,000 (built up from Personal Non Concessional Contributions). This means that 80% ($800,000/$1,000,000) of Barney's Super Benefit is Taxable and $20% ($200,000/$1,000,000) is Tax Free.
Barney commences a Simple Account Based Pension on 1 July 2023 and he is still within his Transfer Balance Cap. This is the appropriate Pension to commence given that Barney is "Retired". Barney withdraws 4% of his Super Benefit as a Pension, that is $40,000. The Tax Free portion of the Pension Income is 20% (i.e. $8,000) and the Taxable portion of the Pension Income is 80% (i.e. $32,000).
Barney has no other Taxable Income given he has "Retired". The SMSF has generated a Taxable Income of $60,000 made up of taxable interest and dividend income and realised capital gains from the sale of shares during the financial year. Franking Credits on the dividend income is $10,000.
Case Study Result
| Tax Result in SMSF |
With SABP |
No SABP |
| SMSF Income |
$60,000 |
$60,000 |
| Dividend Gross Up |
$10,000 |
$10,000 |
| Total Income |
$70,000 |
$70,000 |
| Tax on SMSF Income |
$0 |
($10,500) |
| Franking Rebate |
$10,000 |
$10,000 |
| SMSF Tax Refund / (Payable) |
$10,000 |
($500) |
| Tax Position in Personal Name |
With SABP |
No SABP |
| Taxable Pension Income |
$32,000 |
$0 |
| Tax Payable |
($3,262) |
$0 |
| Low Income Tax Rebate |
$700 |
$0 |
| Pension Rebate |
$4,800 |
$0 |
| Personal Tax Refund / (Payable) |
$0 |
$0 |
| Overall Tax Result |
With SABP |
No SABP |
| SMSF Tax Refund / (Payable) |
$10,000 |
($500) |
| Personal Tax Refund / (Payable) |
$0 |
$0 |
| TOTAL Tax Refund / (Payable) |
$10,000 |
($500) |
Case Study Result
As the above example demonstrates commencing a Simple Account Based Pension between Preservation Age and 59 has saved Barney $10,500 in tax. You should obtain your own independent financial and taxation advice about which course of action is appropriate to your circumstances.
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To establish a Simple Account Based Pension, please submit an Online Application Form here.
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