Use this part if the payee is receiving a capped defined benefit income stream during the year and is:
- 60 years old or over and
- their super income stream is made up of
- tax-free component
- taxable component – taxed element
- tax-free component and the taxable component – taxed element.
Withholding steps
Step 1: Convert the super income stream components the payee received for the period to an annualised amount and use the following table to work out whether withholding applies, and if so, what amount it applies to.
Income stream components |
Does withholding apply? |
|---|---|
Sum of the annualised tax-free component and taxed element is less than the Defined benefit income cap |
No withholding applies. No further steps are necessary. |
Sum of annualised tax-free component and taxed element is greater than the Defined benefit income cap |
Withholding applies to 50% of the amount over the cap. Go to Step 2. |
Step 2: Calculate the weekly, fortnightly or monthly equivalent of the amount from Step 1 in excess of the cap. For example, if you pay the payee weekly, divide the excess by 52. If you pay fortnightly, divide the excess by 26. If you pay monthly, divide the excess by 12 (ignore cents in the result).
Step 3: Divide the amount calculated at Step 2 by two (ignore cents in the result).
Step 4: Use the appropriate PAYG withholding tax table to calculate the withholding amount relevant to the amount worked out in Step 3. The tax table you use depends on the period the income stream covers – that is, weekly, fortnightly or monthly.
These examples use the PAYG withholding tax tables that apply from 13 October 2020.
Example: Case B (i): Capped defined benefit income stream where the annual entitlement is under the cap
Courtney, 61, receives a fortnightly capped defined benefit income stream of $2,000 comprising:
- a tax-free component of $200
- a taxable component – taxed element of $1,800.
Courtney is entitled to the full defined benefit income cap amount of $106,250 as there are no factors present that reduce this cap. The annual equivalent of Courtney's fortnightly super income stream ($52,000) is less than the defined benefit income cap of $106,250. As Courtney is over 60 years old and her capped defined benefit income stream is comprised wholly of a taxed element and tax-free component of less than $106,250 for the income year, no withholding is required.
End of example
Example: Case B (ii): Capped defined benefit income stream where the annual entitlement exceeds the cap
Bill, 63, receives a fortnightly capped defined benefit income stream of $6,550 comprising:
- a tax-free component of $750
- a taxable component – taxed element of $5,800.
Bill is entitled to the full defined benefit income cap amount of $106,250 as there are no factors present that reduce this cap.
Step 1: The annual equivalent of Bill's fortnightly capped defined benefit income stream is made up of an annualised tax-free component of $19,500 and annualised taxed element of $150,800 totalling $170,300, which is greater than the defined benefit income cap of $106,250. Withholding applies to 50% of the amount over the cap. Go to Step 2.
Step 2: Calculate the fortnightly equivalent of the amount in excess of the cap.
$170,300 − $106,250 = $64,050
$64,050 ÷ 26 = $2,463 (ignoring cents)
Step 3: Divide the amount calculated at Step 2 by two.
$2,463 ÷ 2 = $1,231 (ignoring cents)
Step 4: Use the Fortnightly tax table to calculate the withholding amount relevant to the amount worked out in Step 3.
As Bill has claimed the tax-free threshold the withholding amount is $122.
End of example