Author: JM_84(Champion)Champion 10 June 2024
In an accumulation account, the tax-free is determined based on amounts contributed that count toward this component (such as personal after-tax savings or non-concessional contributions). At a point in time, such as when the trustee needs to pay a lump sum or commence a pension, the underlying tax-free and taxable components are determined. As the tax-free is determined based on actual dollar amounts received, the taxable component will be a balancing figure. Therefore, any earnings will form part of the taxable component.
When a super pension is commenced, the proportion of the tax-free and taxable are determined at that time (the commencement of the pension). For example, 30% tax-free and 70% taxable. These proportions are retained throughout the lifetime of that pension. If the account balance in the pension increases, this means that 30% would be attributed to the tax-free and 70% to the taxable component. On the page Bruce provided - the heading 'income stream benefits' provides additional information. '
If you move your pension back to accumulation, the tax-free portion is identified as a dollar amount. Any future earnings are added to the taxable component.
Regardless whether a person has super savings in accumulation phase or pension phase, the underlying tax components retain those characteristics and may give rise to tax implications for non-tax dependants.
Thankyou very much @JM_84. So if there is no taxable component when the income stream is started, there will be 0% Taxable element in that account. This means earnings earned within that income stream are not creating any taxable element $ for a nondependant beneficiary, correct? Which would be different to earnings accumulating in an accumulation account, correct? And if there were a proportion of taxable funds in the initial income stream amount, the higher that proportion is, the higher the proportion of the earnings that would also become a taxable element in the hands of a nondependant beneficiary, right?
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