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The quiet death of the low-rate cap

By Fabian Bussoletti, Technical Manager, SMSFA
May 10 2024
2 minute read
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It will come as no surprise that superannuation’s preservation age has been gradually increasing, in accordance with the schedule outlined in Table 1 below.

However, this gradual increase in preservation age is set to come to an end as, from 1 July 2024, preservation age will have reached its legislated peak at age 60.

Table 1: Preservation age

Date of Birth Preservation age

Before 1 July 1960


1 July 1960 – 30 June 1961


1 July 1961 – 30 June 1962


1 July 1962 – 30 June 1963


1 July 1963 – 30 June 1964


After 30 June 1964


This means that from 1 July 2024, individual’s will only reach their preservation age once they turn 60.

This also means that those who have already reached their preservation age, which may have been earlier than age 60 depending on their date of birth (refer to Table 1 above), will by now have also turned 60 (or older).

So, it will no longer be necessary to consider differing individual preservation ages, based on someone’s date of birth, when determining whether an individual is able to access superannuation benefits.

From a personal taxation perspective, this also leads to a number of interesting, and perhaps less obvious, changes.

Of course, we know that once an individual turns 60 their superannuation benefits are generally tax-free (upon meeting a relevant condition of release).

And, for individuals able to access their superannuation benefits before reaching preservation age (e.g. due to permanent incapacity or severe financial hardship), any taxable component included as part of a lump sum benefit will continue to be subject to tax at 20% (plus Medicare Levy).

However, due to the abovementioned alignment between preservation age and age 60, we will no longer have individuals who are aged between their preservation age and age 60.

As a result, the low-rate cap (i.e. $235,000 in the 2023-24 financial year) and 15% (plus Medicare levy) tax rate, previously applicable to lump sum withdrawals made by individuals in this cohort, will no longer be relevant – that is, they have essentially become redundant.

Similarly, if we consider individuals in receipt of a superannuation income stream, we’d be familiar with the fact that those aged between their preservation age and 60 currently benefit from a 15% tax offset on any taxable portion of their income stream payments.

Once again, from 1 July 2024 this tax offset will no longer be relevant – unless of course the income stream is being received due to the member’s permanent incapacity (i.e. as a superannuation disability benefit), or is a death benefit pension where both the deceased member was, and the beneficiary still is, under age 60.

The tax treatment of pension payments from a Transition to Retirement Income Stream (TRIS), which of course can only be commenced once an individual reaches their preservation age, will also be easier to remember. Where a TRIS is commenced from 1 July 2024 onwards, all pension payments will be entirely tax-free.

From 1 July 2024, the resulting simplification of the tax rules applicable to superannuation benefits can be summarised in the following tables:

Table 2: Tax treatment of a lump sum withdrawals from 1 July 2024

Under Age 60 Age 60+

Tax-free component



Taxable component

20% (plus Medicare levy)


Table 3: Tax treatment of income stream payments (excluding death benefit income streams) from 1 July 2024

Under Age 60 Age 60+

Tax-free portion



Taxable portion

Taxed at Marginal Tax Rates*


* Disability superannuation benefits and certain death benefit pensions will continue to benefit from a 15% tax offset

As evidenced from the above tables, the tax treatment of superannuation benefits will hinge on whether an individual is either above or below age 60 – it will no longer be necessary to consider a separate preservation age based on date of birth.

With preservation age reaching its final destination of age 60 the flow-on simplification of the tax treatment, of both lump sum withdrawals and pension payments, will be a welcome change.

To the low-rate cap, we bid you a fond farewell, and thank you for your service!


The content of this blog has been intentionally limited to a discussion relating to benefits received from taxed superannuation funds. The tax treatment of benefits received from untaxed superannuation funds will differ.

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