SMSF TechnicalLow rate cap amount - Currently $215,000 for 2021 financial year

July 1, 2020by Kris Kitto0

The low rate cap amount is indexed in line with AWOTE each February and available from the ATO. Applicable for superannuation lump sums.

Low rate cap amount

The application of the low rate threshold for super lump sum payments is capped. The low rate cap amount is reduced by any amount previously applied to the low rate threshold.

The following are the cap amounts from the ATO website:

  • 2020–21 – $215,000
  • 2019–20 – $210,000
  • 2018–19 – $205,000
  • 2017–18 – $200,000

These amounts apply for superannuation lump sums paid to persons under age 60 but above preservation age.

Preservation age
preservation age SMSF lump sum

Taxation treatment of superannuation lump sums

  • The tax free component of a lump sum member benefit is non-assessable non-exempt (NANE) income regardless of age.
  • In additional any amounts withdrawn under Compassionate Grounds condition of release for those impacted by COVID-19 are also non-assessable non-exempt (NANE) income with no tax payable.
  • NANE amounts are not reportable in the tax return of the individual who receives payment.
  • The taxation of the taxable component is outlined below.
Taxed Element
  • Under preservation age: 20%*
  • Preservation age to age 59: 0% up to the low rate cap / 15%* for amounts above the low rate cap
  • Age 60 and over: NANE income
Untaxed Element
  • Under preservation age: 30%* up to $1,565,000 / 45%* above $1,565,000
  • Preservation age to age 59: 15%* up to $215,000 / 30%* for amounts above $215,000 but under $1,565,000 / 45%* above $1,565,000
  • Age 60 and over: 15%* up to $1,565,000 / 45%* above $1,565,000

*Plus Medicare Levy

The low rate cap is a lifetime cap, indexed annually with AWOTE and rounded down the the nearest $5,000. This means the cap is reduced by previous lump sum payments made to the member where the low rate cap has been applied.

The upper cap is also indexed annually with AWOTE and rounded down the the nearest $5,000. The higher upper cap is a per plan cap.

Also read: Re-contribution strategy ‘Magic Window’ created with bring-forward rule

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