Generally speaking, all the types of pension are taxed in the same way when they are paid
to you. Pension payments are taxed:
As your personal income, less an allowance for the undeducted purchase price of the
pension[1]
With a 15% rebate of the taxable amount of the pension payment, if the pension is not
regarded as 'excessive'.
Pensions will not be regarded as excessive if all superannuation benefits paid to you to date,
including the value of any pensions[2],
does not exceed your Reasonable Benefit Limit (RBL). Your RBL consists of:
a lump sum
amount of $562,195[3] (the lump sum RBL); or
if at least 50% in value of your total benefits is paid in the form of a complying pension
-- that is, as a lifetime pension -- then the RBL is doubled
to $1,124,384[3] (the pension RBL).
Thus lifetime pensions have significant tax advantages in giving you access to the pension RBL.
The allowance is determined as the undeducted purchase price of the pension,
divided by the life expectancy of the pensioner at the date of commencement
of the pension. Life expectancy factors are set out here. For reversionary pensions,
the higher life expectancy of the two beneficiaries is applied.
