Australian superannuation maturity conditions

[Kenny202]

Just wondering if anyone cashed in their super last few years and know whats what. I was born May 17th 1963 so it looks to me like my maturity age is 58. My super contributions over the years were all just standard company contributions. I never made any extra lump sum payments etc.

 

Does that mean at 58 years I will be able to withdraw all of my super or take payments without penalties or any tax component?

 

All of the websites cite 58yrs as my maturity age but then go on to state after 60 you can take your cash without penalty.

I haven't filed a tax return for 4 years. Mainly because I haven't been in the country and haven't worked in Australia or anywhere else.

I have received a very small amount of interest from money invested over the last 4 years but no biggy, Total under $5000.

I have enquired to my super manager before and after a lot of too-ing and fro-ing they finally agreed 58yo was the age but were balking on stating if there would be penalties etc saying it would all need to be calculated at the time of withdrawal. My super fund is pretty basic and I don't believe it would take anymore than a quick check their end to give me a straight answer

 

So my 2 questions are (if anyone knows).....

 

1) Will I be able to access my super penalty or tax free at 58yo

 

2) Will I have to get my tax returns up to date, pay any taxes on interest etc before I can withdraw on my super?

Edited April 25, 2019 by Kenny202

[moojar]

Hi,

 

There are tables showing your 'preservation age' that are kinda confusing.  This government calculator is quick and easy, shows your preservation age is indeed 58:

https://www.moneysmart.gov.au/tools-and-resources/calculators-and-apps/super-and-pension-age-calculator

 

And this section on the same website says:

Quote

Lump sum withdrawals

If you are aged 60 or over, any withdrawals from a taxed super fund are tax-free. Different rates may apply to untaxed funds, such as government super funds.

If you access your super before age 60 you may pay tax on withdrawals. You can withdraw up to the low rate threshold, currently $205,000, tax-free. This is a lifetime limit and is indexed annually. The threshold does not include the tax-free portion of your super account, which will be returned to you tax-free. Any amounts over the low rate threshold will be taxed at 17% (including Medicare Levy) or your marginal tax rate, whichever is lower.

https://www.moneysmart.gov.au/superannuation-and-retirement/how-super-works/tax-and-super

 

There are a few ifs buts and maybes on that page, but your Super fund should be able to clear it up easily - most of the ones I have dealt with - Industry Funds - are really helpful, lots of info on their website and a help line to call.  Nasty Unionists!  ????   The only unhelpful / cagey mob I ever dealt with were for-profit "investment advisers", more interested in building their own wealth than building mine. 

 

Cannot help you with part 2) of your question.  The ATO has a help line, they might help.  Or, again, your Super fund.  Have a look at the "withdrawal form" or such, might have some clues. 

 

Cheers.  

 

 

[MikeN]

If you have never made any extra contributions to your super from your after tax salary then you probably will not have a “tax free” portion, any statements from your super account should show if this is so. Your super will be taxed if you take it before aged 60, but with the tax threshold mentioned above. So depending on the amount you may or may not have to pay tax ......

 You say you have not submitted a tax return for 4 years. Have you written confirmation from the ATO that you are not an Australian tax resident ? Because otherwise you should still have submitted a return and declared all worldwide income, even a little bit of interest. 

 When your super company pays out on your account they will automatically notify the ATO via your tax file number, so I suspect they might take a bit closer look at you and notice that you have not submitted a return. You say that you haven’t worked anywhere else but the ATO might wonder about that.

 Things might have changed recently but when I retired a few years ago I had to declare my super payout on my tax return even though it was effectively tax free. The ATO goblins might not worry about an interest income of around $1250/year but they might be interested when their computers show an income of (for example) $200,000 as notified by your super company, but no tax return to match .....

 It’s better to confess now than have them chasing you.

PS. If you had submitted a return with only your bank interest as income, and you had not officially retired, you would have been eligible for the”low income rebate” from the ATO. I don’t know if this can be used to pay any tax penalties for a late return, but you might be lucky !

[Kenny202]

This is where it gets a bit grey for me. Says maturity age 58, means I can withdraw it at 58yo I assume without penalty but then says after 60 no tax? I don't know if this necessarily means I need to pay tax at withdrawal at 58yo...or does it?

 

I don't understand what you mean about a "tax free portion". I thought the employer contributions where the tax free component and any other personal contributions or salary sacrifice etc where possibly taxable particularly if early withdrawal?

 

My other concern is I have been out of the country 4+ years so now I would be considered a non resident for tax purposes however I did have some early correspondence with my super company saying that as the contributions were added whilst I was a resident non resident will not apply.

 

The low rate threshold of $205k tax free. Does this mean for eg: I can wait until 60 to withdraw the lump sum, but at 58yo I want to withdraw say $100k to keep me going for a couple of years. Can I do that at 58yo without penalty or tax?

 

Thanks for the help fellas

 

 

[MikeN]

from the moneysmart website linked above :

The taxable component is made up of:

• Employer contributions
• Salary sacrificed contributions
• Personal contributions where a tax deduction was claimed

The tax-free component is made up of:

• After tax contributions
• Government co-contributions

I assume your account is mainly taxable component ?

In that case this from the ATO (https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=12) applies :

 

In most super funds earnings are taxed within the fund and therefore "taxable component-taxed element". Its only some older government funds that would have an untaxed element.

So i read it that if you are in a standard industry or private super fund, over the preservation age AND under the threshold you will pay no tax .....but I'm not a financial planner so don't take this as financial advice and sue me if I'm wrong !

 

My other concern is I have been out of the country 4+ years so now I would be considered a non resident for tax purposes

 

Not necessarily ! If they have not said otherwise then the ATO will consider you to still be a tax resident.

 

I can understand your confusion, I consider myself to be financially literate but all this stuff gave me a headache when i retired, 45 minutes with a financial advisor was the best $150 dollars I've ever spent.

Edited April 26, 2019 by MikeN

[Kenny202]

1 hour ago, MikeN said:

from the moneysmart website linked above :

The taxable component is made up of:

• Employer contributions
• Salary sacrificed contributions
• Personal contributions where a tax deduction was claimed

The tax-free component is made up of:

• After tax contributions
• Government co-contributions

I assume your account is mainly taxable component ?

In that case this from the ATO (https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=12) applies :

 

In most super funds earnings are taxed within the fund and therefore "taxable component-taxed element". Its only some older government funds that would have an untaxed element.

So i read it that if you are in a standard industry or private super fund, over the preservation age AND under the threshold you will pay no tax .....but I'm not a financial planner so don't take this as financial advice and sue me if I'm wrong !

 

My other concern is I have been out of the country 4+ years so now I would be considered a non resident for tax purposes

 

Not necessarily ! If they have not said otherwise then the ATO will consider you to still be a tax resident.

 

I can understand your confusion, I consider myself to be financially literate but all this stuff gave me a headache when i retired, 45 minutes with a financial advisor was the best $150 dollars I've ever spent.

Thanks mate yeah that makes sense. So by the "threshold" you mean $205k.

So if I draw funds after I am 58yo and before I am 60yo providing I don't draw out more than the $205k there would be no penalty or tax? That seems to be the case.

 

I would probably prefer to leave the money in the fund and draw on it as a pension when matured but not sure how I would work that. On the other hand the last few years the government seems to be talking about super funds as if it were their money and theirs to do what they wish (and cover all of their financial f#k ups) so I would be apt to withdraw the full amount and invest it myself.  

[Will27]

4 hours ago, MikeN said:

from the moneysmart website linked above :

The taxable component is made up of:

• Employer contributions
• Salary sacrificed contributions
• Personal contributions where a tax deduction was claimed

The tax-free component is made up of:

• After tax contributions
• Government co-contributions

I assume your account is mainly taxable component ?

In that case this from the ATO (https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?page=12) applies :

 

In most super funds earnings are taxed within the fund and therefore "taxable component-taxed element". Its only some older government funds that would have an untaxed element.

So i read it that if you are in a standard industry or private super fund, over the preservation age AND under the threshold you will pay no tax .....but I'm not a financial planner so don't take this as financial advice and sue me if I'm wrong !

 

My other concern is I have been out of the country 4+ years so now I would be considered a non resident for tax purposes

 

Not necessarily ! If they have not said otherwise then the ATO will consider you to still be a tax resident.

 

I can understand your confusion, I consider myself to be financially literate but all this stuff gave me a headache when i retired, 45 minutes with a financial advisor was the best $150 dollars I've ever spent.

Pretty sure he will is a non-resident but it will be what he declares when he lodged a tax return.

 

It's based on self assessment so the ATO will take at face value what you declare.

Doesn't mean it's correct though.

[LosLobo]

Be well informed before you withdraw any lump sums from superannuation!

 

If Labor wins the next election next month they will stop dividend imputation (franking credits) for some private share investment.

[MikeN]

11 hours ago, Will27 said:

Pretty sure he will is a non-resident but it will be what he declares when he lodged a tax return.

 

It's based on self assessment so the ATO will take at face value what you declare.

Doesn't mean it's correct though.

Yes, that’s why I said “ not necessarily “.

 If somebody was an Australian tax resident when they last did a tax return then the ATO would assume they still are, until that person notifies them otherwise and the ATO confirms it.

[4MyEgo]

On 4/26/2019 at 1:05 PM, Kenny202 said:

My other concern is I have been out of the country 4+ years so now I would be considered a non resident for tax purposes however I did have some early correspondence with my super company saying that as the contributions were added whilst I was a resident non resident will not apply.

Hope this helps as I found it to be very confusing.

 

I am a non resident so we are on par there.

 

I was born 4 August 1960 so my preservation age was 58 and I took part of my super out, i.e. tax free up to the threshold amount as advised at the time, which was $195,000, now reading for the first time it's $205,000 might have increased since I took my part amount out.

 

What you have to do is ask your superannuation company if all of your contributions had the tax component i.e. 15% tax paid as it went in, and if they say yes, your done and dusted, if there is any tax that was not paid when the money was paid into your superannuation fund as a resident, you will have to pay the 15% tax, now this is highly unlikely because tax is usually paid when the contribution is paid in to the fund.

 

As your under 60, if you go over the threshold amount, you will pay tax on any amount over the threshold, so hold off on withdrawing anything over the threshold until your 60 years of age when its tax free, because it will be taxed on non resident rates, see below.

 

You will have to declare the money you have drawn in your tax return, I haven't done that yet as I withdraw the money after the 1st July that just passed, it's just general advice for the ATO to know what's going on, nothing to hide, so lodge the tax return, should be straight forward and as a non resident you don't need to lodge a tax return unless you are making an income from back home, and as I do, I do tax returns, suffice to say, I will advise them this next tax return come end 30 June 2019.

 

If you do take the lot, the amount of tax you will pay will not be 15% or 20% as others have posted, IT WILL BE BASED ON THE NON RESIDENCY TAX SCALE, i.e. 32.5% up to $90,000 over the threshold of say $205,000 if it is that, and then it jumps to 37% from $90,001 to $180,000 and then 45% from $180,001 and over, SO THINK CAREFULLY about leaving the balance over the threshold in there until you're 60 when it becomes tax free.

 

To qualify, you must not be working and have reached the preservation age, if your calculations say 58, just make sure with your fund and then go from there.

 

Hope this has answered your question.

 

Tax scale for non resident link: https://www.ato.gov.au/Rates/Individual-income-tax-rates/?page=1#Foreign_residents

Edited April 28, 2019 by 4MyEgo

[Kenny202]

Thanks mate. Good to hear from someone who has recently done this. I need to lodge a couple of years back tax returns. As I haven't worked there will be nothing to declare apart from interest received on a small investment (under 5000k interest PA) per last two years. If I am still considered a resident for tax purposes should be zero tax as under tax free threshold. I haven't declared myself a non resident but as I have not returned in 5 years and hold no property in Australia officially I am a non resident for tax purposes. Do I declare myself a non resident and pay the tax on the small amount of interest or hope for the best? I was advised some time ago to wait until they make this declaration as there can be other implications....

 

Times comes to take some of my super at 58yo up to $200k will be more than enough to see me through until 60. Only living expense money don't have any plans to buy property or invest in a business etc. I assume you can take a small portion and leave the rest invested under the current conditions? or not? Or maybe work out a pension / payment plan with them. With Colonial mutual by the way and their information and assistance in the past has been dreadful as has been their investment performance although lately there seems to be some appreciation of my fund. Heres a reply I got from them about a year ago re paying tax as a non resident. I was at the time asking the question for over 60yo but for what its worth...

 

Thank you for your email. Your residency status defines your taxation liability at the time of payment.  if however you are an Australian citizen also this overrides any non-residency status held and tax is then based on your Australian citizenship under superannuation preservation rules. In summary if you are a non-resident at the time of payment however you are also an Australian citizen and have reached the age of 60 and retired, no tax is payable on release.

 

By the way is it possible to lodge old tax returns online going back 2 or 3 years?

 

 

 

[4MyEgo]

17 hours ago, Kenny202 said:

Thanks mate. Good to hear from someone who has recently done this. I need to lodge a couple of years back tax returns. As I haven't worked there will be nothing to declare apart from interest received on a small investment (under 5000k interest PA) per last two years. If I am still considered a resident for tax purposes should be zero tax as under tax free threshold. I haven't declared myself a non resident but as I have not returned in 5 years and hold no property in Australia officially I am a non resident for tax purposes. Do I declare myself a non resident and pay the tax on the small amount of interest or hope for the best? I was advised some time ago to wait until they make this declaration as there can be other implications....

 

Times comes to take some of my super at 58yo up to $200k will be more than enough to see me through until 60. Only living expense money don't have any plans to buy property or invest in a business etc. I assume you can take a small portion and leave the rest invested under the current conditions? or not? Or maybe work out a pension / payment plan with them. With Colonial mutual by the way and their information and assistance in the past has been dreadful as has been their investment performance although lately there seems to be some appreciation of my fund. Heres a reply I got from them about a year ago re paying tax as a non resident. I was at the time asking the question for over 60yo but for what its worth...

 

Thank you for your email. Your residency status defines your taxation liability at the time of payment.  if however you are an Australian citizen also this overrides any non-residency status held and tax is then based on your Australian citizenship under superannuation preservation rules. In summary if you are a non-resident at the time of payment however you are also an Australian citizen and have reached the age of 60 and retired, no tax is payable on release.

 

By the way is it possible to lodge old tax returns online going back 2 or 3 years?

 

 

 

I have always been of the opinion that you be as upfront with the ATO as you can, unless it's cash under the table ????

 

I am also with the same super fund, they can only advise you of certain things and usually don't like to enter the arena of information for tax liabilities as it could come back and bite them in the butt, that said their email reply is saying one thing, and then the opposite from the way I digest it, that said, the advice I got from my accountant and the ATO was that if I took more than the threshold at preservation age, would mean that I would be taxed on the non-residency rates, regardless if I am an Australian Citizen or not, income derived from Australia is income derived from Australia, now both my accountant of 35 years and the ATO could be wrong and the super fund right, but I like to cover my bets, e.g. from the horse's mouth which I feel can bite me if the super fund is wrong. 

 

That said, your smart enough to take only what you need up to the threshold and pay zero tax regardless of residency status, and if your contributions paid tax on the way in to the fund.

 

As for lodging your tax returns from a few years back, sure, let them know you owe them some interest, can't hurt that much, but if you wait and they come to you, it will look like you are trying to avoid them and they might sting you with a fine, just for fun.

 

As for residency status, yes I agree you are a non resident and can always argue that your not, but good luck with that, who wants the hassle, um, ok, I'm a non resident, what do I owe you, over and done with instead of, your not a resident, here is your fine, you have the right to appeal within x amount of days, yaitta yaitta yiatta.

 

I have a few bucks in the bank back in Oz and a few bucks in the stock market, the bucks in the bank aren't really earning me much interest, but the bucks are there and I draw on them when I need the money and send the bucks via Transferwise and it's in my account within a day or two.

 

I don't want too much money here because I hear it's hard to get back out, so why bother, sure the Oz $ isn't doing too well, but I work on the principal of what I need to live a comfortable life without going over the top and I times that x 12 and send it over, a few months before its time to renew my extension I send the next 12 months over, however if your on the retirement extension, your best to open an account just for that and leave the 800,000 baht in it, less headaches, and another account for what you need to survive on x 12 months of your budget and stick to it.