Why is my tax credit multiplied by 5?

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Prosper

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I'm an OAP. I lodged a query on ROS because I wanted to understand my tax liability if I decide to switch my Buy-Out-Bond pension fund into an ARF and drawdown the obligatory 5% p.a. Revenue responded and my tax credits total €4,245 reduced by my state pension of €16,202.10@20% brings my tax credit down to €1,004.58. But then they added that I would be allowed to earn €5,022.90 tax-free (i.e. €1,004.48 x 5 = €5,022.90). Why is my tax credit multiplied by 5?
So, If I understand correctly:
  1. the standard rate cut-off is €44,000 less my state pension of €16,202.10 = €27,797.90
  2. If the drawdown from the ARF plus any other taxable income I earn totals €27,797.90, then I would have a tax payable of just €536.68 (€27,797.90 @ 20% = €5,559.58 less tax credit of €5,022.90 =€536.68) ?
  3. Any taxable income above the €27,797.90 would be taxed at 40% ?
 
Prosper said:
.
  1. the standard rate cut-off is €44,000 less my state pension of €16,202.10 = €27,797.90
  2. If the drawdown from the ARF plus any other taxable income I earn totals €27,797.90, then I would have a tax payable of just €536.68 (€27,797.90 @ 20% = €5,559.58 less tax credit of €5,022.90 =€536.68) ?
  3. Any taxable income above the €27,797.90 would be taxed at 40% ?
Click to expand...
No.

If your income outside of the state pension is 27,797.90, your tax due is:
27,797.90 @20% = 5,559.58 less tax credit of 1004.48 = 4,555.06

If your income outside of the state pension is 5,022.90, your tax due is zero.
 
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