Tax on TPD payment into super

Question

BlakeATO · Accepted Answer

The general balance transfer cap refers to your income stream retirement phase account, rather than the overall total of your super. You can't just withdraw an amount from your super balance to bring down your cap. The cap does not refresh, so even if you remove some, it won't reduce your account's cap balance. However, if you currently don't have an income stream, it means whatever goes into your super fund will be in accumulation phase. If you then decide to start an income stream and have not had one previously, you can move an amount up to your transfer balance cap, which may be 1.7million into an income stream and leave the rest in accumulation phase. Your fund will charge 15% tax on earnings your accumulation balance makes. If you withdraw a lump sum from super, it will be taxed according to the super tax rates. For age 60+, a lump sum has no tax on the tax-free component, or the taxable component taxed element. However, the taxable component - untaxed element, is taxed at your marginal rate or 17%, whichever is lower. You can read about excess transfer balance and how tax applies to your super on our website.

BlakeATO · Answer

The taxable component - untaxed element of your super is amounts where your fund hasn't paid any tax on the contributions or earnings made to your account. They're usually in untaxed super funds, which are generally run by Commonwealth, State or Territory government departments. To find out what portion of your fund is taxable component - untaxed elements, you'll need to talk to your super fund. You have no limit to the amount you can keep in your accumulation phase. There's no penalty for exceeding the general balance cap (since accumulation phases aren't part of the general balance cap). :) You can read about taxable component - untaxed element on our website.

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