Account Based Income Streams

The most common income stream product that super funds offer to provide members with a regular income is called an account-based income stream. These are offered by all public offer super funds. A minimum amount must be taken each year but there is no maximum limit. This income stream product was previously referred to as an 'allocated pension'.

Similar to the taxation of lump sum withdrawals, any income payment is broken up into the tax-free and taxable components. This is determined when the pension first commences. If you are under 60 years of age, the tax-free component of the income payment is tax free, while the taxable component is taxed at your marginal tax rate but you are entitled to a 15% pension tax offset.

If you are over age 60, the total income payment is completely tax free regardless of the underlying components.

The above taxation implications relate to income streams paid from a taxed superannuation fund.

If, however, a pension is paid from an untaxed superannuation fund (generally public sector superannuation schemes that have not paid the 15% contributions tax), the tax treatment for the taxable component is higher and continues to be taxable after age 60 but with a 10% tax offset.