How Australia taxes a retirement plan

We model these and we know we do not get them exactly right. Where the size could be measured, it is stated.

• Australians are taxed one by one, with no joint return, and we split your household's taxable income evenly between you to reproduce that. Where the income really is even we are exact. Where one partner holds nearly all of it we understate the tax, by up to about 10,000 a year for a couple with 90,000 between them. Two things soften it: super drawn after 60 is invisible to tax, and the rest is usually investment income a couple can hold evenly.

  Your real tax is higher/up to $10,000 a year/couples whose taxable income outside super sits mostly with one partner

• The seniors and pensioners offset has an amount that really is frozen in law and income limits that rise with prices every year. We freeze both, which is the cautious choice. Thirty years into a plan, a retiree whose income sits just below where the offset starts shading out loses all 2,230 of it in our figures while the law would still grant it in full, so we show up to about 2,230 a year too much tax, worth roughly 1,060 in today's money.

  Your real tax is lower/up to $2,230 a year/a retiree over 66 whose income sits just below the point where the seniors offset starts to shade out

• Each partner of a couple gets a smaller seniors and pensioners offset than a single person does, and we apply the couple figures. A couple who have to live apart for health reasons, one of them in a nursing home or in hospital, keep a larger offset each. We never ask about that, so for such a couple we show up to about 438 a year too much tax for each partner.

  Your real tax is lower/up to $438 a year/each partner of a couple who must live apart because one of them is in care or in hospital

• Australia's Medicare levy, a health charge on taxable income, starts later for a couple than for a single person, and later again for each dependent child. We never ask about children, so a retiree still supporting one starts paying it sooner here than in law. We also could not confirm the rate at which it eases in for a couple, and we use the higher of the two figures we found. If the lower one is right, a couple in that band pays up to about 308 a year we should not be showing.

  Your real tax is lower/up to $308 a year/a retired couple in the band where the health levy is easing in, and any retiree still supporting a dependent child

• From retirement the plan takes the legally required minimum out of your super pension every year, from 4 percent of the balance under 65 rising to 14 percent at 95 or more. The payment itself is tax free, and whatever you do not spend is moved to an ordinary account, where its earnings are taxed from then on. Over a long retirement that migration is the main way an Australian retiree acquires a tax bill at all, and the plan now prices it. What we simplify: the government has twice halved the minimums in a market crash, and we always charge the full table, which makes the plan slightly more careful in bad markets.

  Your real tax is lower/anyone drawing an Australian super pension through a market crash, when the real minimums have historically been halved

• The higher health levy threshold for seniors is tied to the seniors and pensioners offset: once your income is high enough that the offset has run out, the higher threshold goes with it and the levy can jump straight to its full 2 percent. We treat the two as unconnected, so in our figures the levy always eases in gradually. In the income band where that happens we show less tax than you would pay.

  Your real tax is higher/a retiree whose income is high enough for the seniors offset to have run out

• Dividends from shares outside Australia have 15 percent kept by the country they come from, and Australia credits that back only up to its own tax on the same income. We set the credit against your whole tax bill rather than against the tax on the foreign dividends alone. That is exact when foreign shares are most of what you own, and too generous when a small foreign holding sits beside a much larger Australian income, where we show less tax than you would pay.

  Your real tax is higher/anyone holding international shares beside a much larger Australian taxable income

• We assume the Australian shares you hold are large companies, whose dividends carry a credit at the 30 percent company tax rate. Smaller companies pay 25 percent, and their dividends carry a proportionally smaller credit. If your Australian shares are mostly smaller companies, the credit we hand you is bigger than the one you would get and your tax is understated.

  Your real tax is higher/anyone whose Australian shares are smaller companies rather than large caps

These exist in law and we leave them out, usually because applying them would need a question we do not ask.

• From July 2026 a very large super balance is no longer fully sheltered. An extra 15 percent applies to the share of your fund's earnings sitting above 3 million, and another 10 percent above 10 million, billed to you personally. We do not charge it. In our source material a 4 million balance earning 240,000 pays 9,000 a year and a 6 million balance pays 27,000. It reaches fewer than one super holder in two hundred, and the threshold is per person rather than per couple.

  Your real tax is higher/up to $27,000 a year/anyone with more than 3 million in super, a small group nationally and a larger one among people who use a tool like this

• Land tax is charged by the state, and it is the one Australian tax on an asset you simply hold. Your own home is exempt everywhere and shares are not land, so your portfolio never meets it. An investment property does. On 700,000 of investment land it is nothing in New South Wales and about 2,850 a year in Victoria. Both states have frozen the point at which it starts, so it grows quietly as land values rise.

  Your real tax is higher/up to $2,850 a year/anyone with an Australian investment property, and it depends entirely on which state it is in

• Australians without private hospital cover pay an extra health charge of 1 to 1.5 percent of their income once it passes 101,000. It is all or nothing rather than a charge on the excess, so a single dollar over the first threshold costs 1,010. We never ask whether you hold hospital cover, so we leave it out entirely. Money drawn from super after 60 does not count towards the threshold.

  Your real tax is higher/up to $1,010 a year/anyone without private hospital cover whose taxable income outside super passes 101,000

• We use this year's rule, which taxes only half of a capital gain made outside super. From July 2027 that halving is replaced by a minimum charge of 30 percent on the gain left after inflation is stripped out, with super funds exempt. We do not apply it, so gains realised outside super from that date are understated. One quirk of it we could not model either way: receiving any Age Pension at all during a year exempts you from the charge for that whole year.

  Your real tax is higher/anyone realising gains outside super from July 2027 who receives no Age Pension that year

• We treat every super pension as tax free, which is right for almost everyone at 60 or over. Two cases are not. An old public sector pension from an untaxed fund is taxed at your normal rates with a 10 percent offset against the bill, and a pension started before 60 is taxed with a 15 percent offset. If either is you, every tax figure here is far too low, because we show nothing where the law charges close to full rates.

  Your real tax is higher/anyone with an untaxed-source public sector super pension, and anyone drawing super before 60

• There is a ceiling of about 2.1 million on what you can move into the tax free part of super. Anything above it stays in the part where the fund itself pays 15 percent on its earnings, and 10 percent on long held gains, out of your money before it grows. We treat all of your super as tax free, so a balance above the ceiling grows faster here than in reality. Your own ceiling is fixed when you first start drawing, so two people retiring a year apart can have different ones.

  Your real tax is higher/anyone with more than about 2.1 million in super

• While you are still saving, your super fund pays tax you never see: 15 percent on its earnings, about 10 percent on long held gains, and 15 percent on every contribution going in, with a further 15 percent on contributions if your income is above 250,000. None of it reaches your own tax return, so none of it appears here, and the balance you build up before retirement is too high. The tax free part of super starts when you begin drawing a pension, not before.

  Your real tax is higher/anyone still building up super rather than drawing it

• The credits attached to an Australian dividend only count if you held the shares at risk for 45 days around it, once your credits for the year reach 5,000. We assume you always qualify. If you buy and hold, you do. If you trade in and out around dividend dates, some of the credits we hand you would be refused and your tax here is too low.

  Your real tax is higher/anyone trading in and out of Australian shares around their dividend dates

• We let a loss on a rental property reduce the tax on the rest of your income. From July 2027 that stops for an existing home bought after May 2026: the loss can then only be set against rental income, with whatever is left carried into later years. A property you already owned in May 2026, or a newly built one, is unaffected. Where the restriction does apply, we show less tax than you would pay.

  Your real tax is higher/anyone who buys an existing residential investment property after May 2026 and runs it at a loss

Separate tax systems, or rules that only bite outside a retirement plan.

• Whatever Age Pension you entered is the amount we pay you. In reality it is cut back by your assets and by an assumed return on your savings, and an account-based super pension counts in full even though it produces no taxable income. The assets side alone withdraws 3 a fortnight for every 1,000 above the free area, about 7.8 percent a year of what it counts. It is a cut to your income rather than a tax, so no tax figure here moves, but far less money can reach you.

  Could go either way/anyone counting on the Age Pension while also holding substantial savings

• Australia has no wealth tax, no inheritance tax and no gift duty, so there is nothing of that kind for us to have left out. There is one charge on death we do not model: super left to an adult child, or to anyone else who was not a dependant, is taxed at 15 percent, or 30 percent on the part that came from an untaxed fund, plus the health levy. A spouse or a financial dependant receives it tax free. It falls on what you leave behind rather than on any year of your plan.

  Could go either way/anyone planning to leave super to an adult child rather than to a spouse

• We never ask which state you live in, and for everything on this page we do not need to. Income tax, the Medicare levy, capital gains tax, superannuation and the Age Pension are federal and identical everywhere, so a retiree in Perth and one in Hobart on the same income pay the same. The one Australian tax that does vary by state is land tax, and it only reaches an investment property.

  Could go either way/nobody: income tax and the health levy are identical in every state

• Aged care in Australia is charged partly on what you have: the fees are worked out from your income and your assets, super included. That is a cost of care rather than a tax, so nothing here charges it, and it only reaches your plan if you entered it yourself as a care expense. We did not research the figures, so we cannot tell you how large it gets. Reading this page as saying an Australian retirement costs almost nothing and stopping there would miss it.

  Could go either way/anyone who ends up needing residential aged care