How does tax work with an Allocated Pension?

If you are age 60 or over, allocated pension payments and lump-sum withdrawals are tax-free.

If you are under age 60, allocated pension payments form part of your assessable income and are taxed at your marginal tax rate (plus Medicare levy). A rebate or tax offset of up to 15 per cent of the taxable amount may be available to you.

Allocated pensions are subject to PAYG tax, just like your salary when you are working. Payment summaries are sent to you at the end of each financial year.

Allocated pensions may offer significant tax advantages by:

• Enabling you to defer your lump sum tax
• Providing tax-free earnings on the assets backing the investment, and
• Potentially providing a tax-free element of your regular payment.