Superannuation Lump Sum

 

A superannuation lump sum payment includes a:

• lump sum member benefit paid to an individual where a condition of release has been satisfied – for example, retirement, terminal medical condition, severe financial hardship, compassionate grounds
• lump sum death benefit paid to an individual following the death of the member or account holder
• commutation of a super income stream (part or all of a super income stream is exchanged for a lump sum).

A superannuation lump sum may be paid from a super fund, approved deposit fund (ADF) or a retirement savings account (RSA).

Components of a super lump sum

A super lump sum may have two components:

• a tax-free component
• a taxable component which can include an
  • element taxed in the fund (taxed element)
  • element untaxed in the fund (untaxed element).

Withholding rates for super lump sums

Type of payment and tax component	Age of person at the date the payment is received	Amount subject to PAYG withholding	Rate of withholding
Member benefit – taxed element of the taxable component	Under preservation age	Whole amount	22%
	Preservation age to 59 years	Amount up to low rate cap	Nil
		Amount above the low rate cap	17%
	60 years and above	Whole amount	Nil
Member benefit – untaxed element of the taxable component	Under preservation age	Amount up to untaxed plan cap	32%
		Amount above untaxed plan cap	47%
	Preservation age to 59 years	Amount up to low rate cap	17%
		Amount above the low rate cap up to the untaxed plan cap	32%
		Amount above untaxed plan cap	47%
	60 years and above	Amount up to untaxed plan cap	17%
		Amount above untaxed plan capAmount above untaxed plan cap	47%
Member benefit – total of preserved benefits is less than $200	Any age	Nil – amount is non-assessable, non-exempt income	n/a
Member benefit – terminal medical condition payment	Any age	Nil – amount is non-assessable, non-exempt income	n/a
Death benefit paid to a dependant – taxed and untaxed elements of the taxable component	Any age	Nil – amount is non-assessable, non-exempt income	n/a
Death benefit paid to a non-dependant – taxed element of the taxable component	Any age	Whole amount	17%
Death benefit paid to a non-dependant – untaxed element of the taxable component	Any age	Whole amount	32%
Death benefit paid to the trustee of the deceased estate	Any age	None	Nil

Additional information

Low rate cap:

For the 2024-25 income year, the low rate cap is $245,000.

For the 2023-24 income year, the low rate cap is $235,000. 

The low rate cap is:

• in relation to super lump sums paid to an individual who has reached their preservation age, the maximum amount of the taxable component that is allowed the lowest rate of tax
• a lifetime limit
• allocated to the taxed element first before allocating the remaining low rate cap to the untaxed element

Untaxed plan cap:

For the 2024-25 income year, the untaxed plan cap is $1,780,000 

For the 2023-24 income year, the untaxed plan cap is $1,705,000 

A terminal medical condition exists if:

• two registered medical practitioners have certified, jointly or separately, that the member suffers from an illness, or has incurred an injury, that is likely to result in the member’s death within 24 months of the date of certification
• at least one of the registered medical practitioners is a specialist practicing in an area related to the member’s illness or injury
• the certification period has not ended for each of the certificates

The certification period is 24 months from the date of certification.

A death benefit dependant for taxation purposes includes:

• spouse of the deceased
• child of the deceased under 18 years old
• a person who had an interdependency relationship with the deceased
• a person who was a dependant of the deceased just before the latter died
• any individual who is paid a lump sum death benefit if the deceased died in the line of duty as a member of the defence force, a member of the Australian Federal Police or the police force of a state or territory, or a protective service officer (as defined in the Australian Federal Police Act 1979)

A spouse of the deceased includes another person (of any sex) who:

• was in a relationship with the deceased that was registered under a law of a prescribed state or territory
• lived with the deceased on a genuine domestic basis in a relationship as a couple, although not legally married

A child of the deceased includes:

• an adopted child, stepchild or ex-nuptial child
• a child of the deceased’s spouse
• a child of the deceased within the meaning defined in the Family Law Act 1975 (for example, somebody who is considered to be a child of a person under a state or territory court order giving effect to a surrogacy agreement)

An interdependency relationship includes:

• a close personal relationship between two people who live together, where one or both provides for the financial and domestic support and personal care of the other
• a close personal relationship between two people who live together but do not satisfy one or more of the requirements mentioned in the previous dot point due to either or both of them suffering from a physical, intellectual or psychiatric disability.