What are the super and retirement rules for over-65s?

Q: My wife (age 63) and myself (age 65) were told by a financial organisation that at 65 or over I could put money into super, pay 15% tax on the way in, and then draw it out when I wished and pay no tax. In fact I have been told to pay myself $30,000 or less and source the rest of my income through my super fund. My accountant has told me that she thinks I have to set up a super pension. Could you please confirm what is correct?

A: I need to divide your question into four parts: making super contributions, accessing super benefits, running a super pension, and tax management strategies.

Before I do provide an answer, I must point out that this website does not give financial advice or tax advice. We are an information website which means any response that I provide is a general response for the benefit of all visitors to our website, rather than a response that you can rely on as personal advice.

In short, I will first explain the contribution rules for over-65s. I will then explain when Australians can access super benefits (conditions of release), followed by the rules that apply when a super account is in pension phase, and finally, the tax management strategy that you mention in your question.

Making super contributions

Anyone aged 65 or over must satisfy a work test before making super contributions. The work test involves working 40 hours in any 30-day period in the financial year in which you plan to contribute. You must be paid for that work.

Note: Anyone under the age of 65 can make super contributions without satisfying a work test. If you’re under the age of 65, you don’t have to be working to make a super contribution.

You can make two types of super contributions – concessional (before-tax) contributions and non-concessional (after-tax) contributions.

Concessional (before-tax) contributions are subject to a 15% contributions tax upon entry to the super account (or 30% tax if your income for surcharge purposes is greater than $300,000 a year, for more information on the extra contributions tax for high-income earners, see SuperGuide article Double contributions tax for more high-income earners).

In contrast, non-concessional (after-tax) contributions are not subject to a contributions tax upon entry into the super fund, because these contributions are already considered to be sourced from income that has been taxed at some stage. I explain the contribution rules for over-65s in more detail, and also the general contribution rules in the following SuperGuide articles:

Note: Owners of small businesses may be eligible for special capital gains tax (CGT) concessions when planning for retirement (click here for the ATO link on this topic), including a special CGT cap when contributing business proceeds to super.

Accessing super benefits

You can withdraw part, or all, of your super benefits when you satisfy a condition of release. For most Australians, the condition of release that applies is reaching preservation age AND retiring.

Your preservation age can be 55, 56, 57, 58, 59 or 60 years, depending on your date of birth. Your preservation age is 55 years if you were born before July 1960, and at least age 56 years if you were born after June 1960, and at least age 57 years if you were born after June 1961. If you were born after June 1964, your preservation age is 60 years. For more information on your preservation age, see SuperGuide article Accessing super: What is my preservation age?

Reaching the age of 65 is also a condition of release, which means that when you turn 65, you don’t have to retire to access your super benefits. You can access your super benefits any time on or after the age of 65.

An individual aged, say 63, would need to satisfy a condition of release, such as, for example, retiring or starting a transition-to-retirement pension (TRIP), to access preserved super benefits.

I explain the conditions of release in the SuperGuide article Accessing super early: 14 legal ways to withdraw your super benefits.

You can also visit the ‘Retirement Planning’’ section of this website, and click on ‘Accessing Super’ for more articles on accessing super benefits.

Note: If you access your super benefits on or after the age of 60, your super benefits are free of tax (unless you’re a member of certain public sector funds known as ‘untaxed funds’). You can find more information on the tax treatment of super benefits in the following SuperGuide articles:

Alternatively you can visit the ‘Super and Tax’ section of this website.

Running a super pension

You don’t have to be receiving a superannuation pension (also known as a superannuation income stream) to access your super benefits, but earnings on a super account are taxed differently depending on whether your super account is in pension phase or accumulation phase.

In simple terms, accumulation phase is when you haven’t started a pension/income stream. Any earnings on fund assets while in accumulation phase are subject to 15% earnings tax. When a super account is in pension phase, any earnings on fund assets are exempt from tax. Starting a pension means tax-free fund earnings, or more specifically, tax-exempt fund earnings.

Important: Note that taking effect from 1 July 2017, Australians can retain, or transfer, no more than $1.6 million into a super pension account (for more information see SuperGuide article Burden for retirees: Monitoring $1.6 million transfer balance cap )

Note: Tax-exempt fund earnings are different from tax-free super benefits payable from a super fund. The difference is that fund earnings relate to the super fund, while super benefits relate to the individual receiving the benefits. For the special conditions required to enjoy tax-exempt earnings, see SuperGuide article Retirement and tax: What are the minimum pension payment rules? Retirement and tax: What are the minimum pension payment rules?

If an individual is under the age of 65 and has NOT RETIRED, but the individual wants to access super benefits, then a popular strategy is to start a transition-to retirement-pension (TRIP). A TRIP enables a working individual who has reached their preservation age to access a maximum of 10% of their super account each year as pension payments. I explain the rules applicable to TRIPs in the SuperGuide article TRIPs: 10 interesting facts about transition-to-retirement pensions.

Tax management strategies

Many Australians use a super fund to save for retirement because the government provides tax incentives to do so. The deal is that you get tax breaks for locking your money away until you retire. I provide a summary of how super is taxed in the ‘Super & Tax’ section on this website, which also contains the following SuperGuide articles:

If you’re considering tax management strategies then the best person to talk to is a registered tax agent, typically an accountant. Any discussion in this article on tax matters is for illustrative purposes only.

The general rule is that if an individual pays less tax in percentage terms on wages and salary (and other income) than the 15% earnings tax payable by the person’s super fund on the fund’s investment earnings and on concessional (before-tax) super contributions, then saving via a super fund is not a tax-effective option (although the federal government has now introduced a refund of contributions tax on employer super contributions for those earning less than $37,000 – for more information on the superannuation tax refund, known as the Low Income Super Contribution, see SuperGuide article Super tax refund for lower-income earners to extend beyond June 2017).

Note: If you are an employee, your employer must make super contributions on your behalf, regardless of your marginal tax rate, which is why the contributions tax refund, known officially as the Low Income Super Contributions (explained in the previous paragraph) is so important.

If you have reached Age Pension age, then you may be eligible for the Seniors and Pensioners Tax Offset (SAPTO) which means you may not pay any tax on your non-super income. SAPTO is not available if your income is significant. I explain SAPTO in the SuperGuide article No tax in retirement because you SAPTO (updated rates).

So, the main message is: if your marginal rate of income tax is 15% or less (the Australian marginal tax rates are 0%, 19%, 32.5%, 37%, 47%), then superannuation may not offer any tax breaks. With every general rule however there are a few exceptions including the following:

  1. Accessing co-contribution scheme. A co-contribution is a tax-free payment from the Government, paid directly into your super account. If your income is under a certain threshold, and you’re working, and you make a non-concessional (after-tax) contribution, then the Government makes a tax-free payment to your super fund. Receiving a 50% tax-free return on a $1,000 super contribution can be a very tax-effective decision. I explain the co-contribution scheme in the SuperGuide article Cashing in on the co-contribution rules (2016/2017 year).
  2. Taking benefits from super on or after age 60.Super benefits paid from a super fund on or after 60 are tax-free (except for certain benefits paid from some public sector funds) which means tax-free super income beats paying income tax.
  1. Starting an income stream/pension. A super account in pension phase is not subject to earnings tax on the account’s earnings, which means an individual aged 60, and receiving a superannuation pension, receives tax-free benefit payments, PLUS the super fund pays no tax on its earnings. The super payments to the fund member are not counted as ‘taxable income’ which means an individual could receive, say, $100,000 a year, from his super fund and still earn nil taxable income. Even when an individual starts a pension before the age of 60, tax offsets and how an individual structures their salary (if any) and pension payments can mean a lower tax bill than if they hadn’t used the super structure. Note that from 1 July 2017, some changes will be made to the tax rules applicable to super pensions (see SuperGuide articles Burden for retirees: Monitoring $1.6 million transfer balance cap and Less tax, more super? A transition-to-retirement pension may no longer be the answer
  1. Refund of contributions tax for those on lower incomes. Effective since 1 July 2012 and now extended beyond 30 June 2017, the federal government contributes up to $500 each year to an individual’s superannuation account, where the individual’s adjusted taxable income is less than $37,000. The exact amount is calculated by working out how much contributions tax is payable on the actual concessional (before-tax) contribution, and then refunding this amount as a payment to the individual’s super account. For more information on the Low Income Super Contribution, see SuperGuide article Superannuation tax refund: 10 things you should know.

Note: Seek tax advice if you’re considering using a super fund as a means of minimising tax.


  1. Gary Weigh & Associates Pty Ltd says:

    Very well explained, Trish. I find this site very helpful. I agree with you that a specialist professional will be most helpful should individuals need personal guidance. A financial advisor can help with individually-tailored super-boosting pre-retirement/retirement strategies and advice.

  2. Prue Giorgio says:

    Hello Trish…I have reached 60 (April) and have decided to retire. My retirement date to leave work is the 01/11/2013. I have a family member who has won some money on x lotto and wishes to pass on $60k to me as a gift. Can I put this into our SMSF and draw on this weekly or as needed, my husband also 60 wishes and will continue to stay in his job. We do have other money in our SMSF however I have taken out 10% (TRIP) for this year, I used this money to put a deposit on a investment property that will be settling March 2014. I would appreciate your advice. Thank you

  3. Hi Trish,
    congrats on such a helpful forum

    I welcome your kind advice on this asap:
    I am registered member Pension bonus scheme since Jan 2007
    and have been employed for more han 960hrs pa in that time until now.

    I am live single in Brisbane, my wife is under 60 and lives in Perth, so we are separated but still friends and I think it correct to claim as a single party.

    As I am over 71 , I intend to lodge my claim for PB and Aged pension immenently
    I was just wondering what formula is use to calculate the amount of PB lump sum applicable.

    I have drawn most of my super and already spent it over the years.
    Whatever super is still to draw is probably less than $20,000 or so.
    I have a 8ooo credit card debt and little else of any value.
    I have no property or other valuable asset.

    How much Lump sum am I likely qualify for
    and what may be the amount of aged pension payable fortnightly


  4. Hi Trish,
    I am 68 years old and drawing a pension stream as per the minimum requirement 2½% last financial year ending 30.06.12.
    I satisfy the ATO work test requirement of 30 hours over 1 month and I am still working.
    Can I still make concessional and non concessional contributions to my DIY super fund?
    I have read on other web sites that I cannot do this if I am in pension stream mode?
    My accountant has told me that I can do this within the limits allowed by the ATO.
    However, I am not really sure what you can do as there is much conflicting advice on the internet and there are heavy fines in place by the ATO if you do not abide by the rules.
    I have also been told that any contributions must go into an Accumulation account, however, it seems that that the Accumulation account is only used prior to going into a pension stream.
    Have tried to ring the ATO and after waiting for over one hour I eventually spoke to someone who confused me further and gave me web page links to find the information there!!
    Hope you may be able to clarify the above for me if you have the time.

  5. Ian Gillies says:

    I am 67 and working 30+ hrs pf and getting the employer 9% . I have 400 hrs accumulated AL & LSL and wondered if I retire is my employer required to contribute 9% on the leave value

  6. I am returning to 24 hours per week work at age 71 . Am I exempt from super cotributions

  7. Mike Heffernan says:

    I am 67 and still working in a senior management role. I have $600,000 in Super. Can I access this to build a house without retiring?

  8. kevin collins says:

    Hi, Hope you can help with some advise, and thanks for you web site. Im born19 39 & wife (Chris)19 46. so we both qualify for the pension. We are trying to retire this year, probably after 30th June but its minefield putting it together. You say speak to you accountant and or financial planner, but unless these folks have a deep understanding how “Centrelink” works., they are not informative.
    We have a diy super fund, & I handle all the investments, mostly in the equity market. my wife is payg and I have been self employed (contractor ) most of my life. We are both registered for the pension bonus . If I can qualify for the full pension, then I will receive the full bonus.
    We have had a meeting with “Centrelink” financial advisor, Who started to give me advise on how to pay down my mortgage ( I,ve been a mortgage broker for 12 years) so that was no help.
    All or funds go through our trust and distributed as the accountant advises.
    We have an investment unit on the gold coast, & will probably make $50k capital gains, so Im looking at how to avoid cgt. if sold after july and we earn little income for that year may be the answer.? so should the profit be paid directly in to our super fund, I think that means a 15% deduction,? I understand we can run the fund till im 75, is that Ok if the fund goes in the pension stage, can I still contribute. I receive $1600 per month in Trail commission, from the trust, how can that be structured as to have no impact on our 100% pension benefit.
    I expect the investments to pay out our mortgage, so we will own the family home.
    We have appx. 100k. in assets. regards, Kevin.

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