Tax on your CSS Benefits
New super tax legislation that affects all super funds and their members came into effect from 1 July 2007. The changes are different depending on whether tax has or has not been paid on contributions.
The CSS is a hybrid scheme - part accumulation, part defined benefit. Your CSS benefit includes both taxed and untaxed components as follows:
- Member component - this is your own contributions plus Fund earnings. We call this a ‘taxed’ component because it is money paid from your after-tax salary directly into the CSS to be invested.
- Productivity component - this is your employer’s productivity contributions since 1 July 1990 (less 15% contributions tax) plus Fund earnings. We call this a ‘taxed’ component because it includes money paid directly into the CSS to be invested. Any productivity contributions paid before 1 July 1990 are treated as an ‘untaxed’ component.
- Employer-financed component – determined only when you leave, this amount is generally paid as a CPI-indexed pension and is calculated based* on your fi nal salary for super purposes, length of membership and your age at exit. We call this an ‘untaxed’ component because it is paid from the Consolidated Revenue Fund (CRF), not the CSS. For tax purposes, it is treated as coming from an ‘untaxed source’.
*If you resign and preserve your benefit in the CSS, your CPI-indexed pension will be based on your basic contributions and interest on the date you claim your benefit.
Benefits from a taxed source
The main changes that affect CSS members include:
- new contribution rules and caps, including a higher tax rate on contributions that exceed the caps
- new thresholds and withdrawal rules including the abolition of tax paid on non-indexed pensions and lumps sums for those aged 60 or over at the time of payment, and
- conversion of the pre-July 1983 component (as at 30 June 2007) to a tax-free component.
Benefits from an untaxed source
The main changes for those claiming a benefit at age 60 or over include:
- a 10% tax offset on CPI-indexed pensions, and
- a threshold for lump sum benefits over $1 million.
