Reader’s question: I withdrew my superannuation a few months before I turned 60. Am I liable to pay tax on it?
Assuming you are eligible to make a withdrawal from super, you will be liable for tax on savings greater than $165,000.
Tax-free super benefits are only available after the age of 60.
Taxable super is made up of savings that came from tax concessional contributions or investment earnings.
Deborah Wixted of Colonial First State says the rate of tax you will pay on taxable lump sums above $165,000 is 16.5 per cent.
Super made up of after-tax contributions or tax-free contributions is not taxed.
To withdraw super, you must satisfy what is described as a condition of release.
The most common condition of release for a lump sum withdrawal before the age of 65 is that you have retired from the workforce and are at least 55 years old.
Wixted says that if your super was more than $165,000 and the benefit was paid from an employer super fund, tax should have been withheld. If tax is due, a super fund is required to withhold tax on a withdrawal and you will need to include this information in your annual tax return.
It is very important that you were eligible to make a withdrawal from super. If you withdrew money from a DIY fund, for instance, but were not eligible to do so because you were still working, you could be taxed at the highest personal tax rate of 46.5 per cent.