Taxation Of Benefits Examples

Taxation of Benefits for a MilitarySuper Preserved Benefit Member - Proportioning at age 30

Corporal Moloney resigns from the Army in June 2006 aged 29, after 10 years of service. She decides to preserve her entire benefit with MilitarySuper. A year later she decides to take all of her available Member benefit as cash.

Her Benefit consists of:
Member Benefit
Member benefit available as lump sum:
Member’s after-tax salary contributions before 1 July 1999	$3000
Interest on Member’s contributions before 1 July 1999	$600
Total benefit available as lump sum	$3600
Preserved Balance of Member benefit:
Member’s after-tax salary contributions after 1 July 1999	$17,600
Interest on Member’s contributions after 1 July 1999	$9,400
Total Preserved Member benefit	$27,000
Total Member benefit	$30,600

Ancillary Benefit of $0

TOTAL BENEFIT	$135,600

The only part of her benefit available as cash is $3,600

The balance of her Member Benefit can be left with MilitarySuper or she can transfer it to another superannuation Fund. Her Employer Benefit remains compulsorily preserved with MilitarySuper.

Tax treatment before 1 July 2007
Lump sum benefit of $3,600	Amount	Tax Treatment
Member’s after-tax salary contributions	$3,600	Tax Free


Gross Lump Sum	$3,600
Tax payable	$0
NETT (before Medicare Levy is applied)	$3,600

Tax Treatment after 1 July 2007
Under the tax changes if you access part of your benefit, the payment will include both tax-free and taxable components in the same proportions as exist in your total benefit.
Total Member Benefit $30,600
Member’s after-tax salary contributions	$20,600
Interest on Member contributions	$10,000

Proportion of total Member Benefit from after-tax salary contributions	($20,600 / $30,600) x 100 = 67%
Proportion of total Member Benefit from interest	($10,000 / $30,600) x 100 = 33%

Proportion of lump sum payable from after-tax salary contributions	67% of $3,600 = $2,412
Proportion of lump sum payable from interest	33% of $3,600 = $1,188

Lump sum benefit of $3,600	Amount	Tax Treatment
Member’s after-tax salary contributions	$2,412	Tax-free
Interest on Member contributions	$1,188	20% tax liability($1,188 x 20% = $238)

Gross Lump Sum	$3,600
Tax payable	$238
NETT (before Medicare Levy is applied)	$3,362