Retirement: 3 ways of taking super benefits before the age of 60

When you retire early, you’re going to have to make a few decisions. The tax implications of your retiring before the age of 60 can depend on whether you take your super as a lump sum and/or pension.

Are you taking your super as a lump sum, a super pension (also known as a super income stream) or a combination of both?

Note: Remember that you must also satisfy a condition of release to access your super benefits before the age of 60, and more generally, to access your super benefits before the age of 65. A condition of release includes retiring after reaching your preservation age; or taking a transition-to-retirement pension (gives you access to up to 10% of your super benefits each year); or suffering a permanent disability, to name a few.

Turning 65: Reaching the age of 65 (with or without retiring) is automatically a condition of release (except for some older super funds offering defined benefit pensions, which may require you to also retire to access a super pension).

Preservation age: Your preservation age depends on your date of birth. If you were born before July 1960, your preservation age is 55 years. Anyone born on or after 1 July 1960 has a preservation age of at least 56 years, and up to 60 years, depending on date of birth. For information on your preservation age see SuperGuide articles Accessing super: What is my preservation age? and Accessing super: Preservation age moving to 57 years.

Lump sum only

When you take all of your superannuation as a lump sum, you pay your concessional rate of super benefits tax (if any) and leave the super system.

Super benefits can be made up of two components

If you receive a superannuation lump sum on or after your preservation age, and before the age of 60, you can take advantage of the low-rate cap, an indexed lifetime limit that applies to your taxable component. You can receive up to $195,000 (for the 2016/2017 year) of your taxable component tax-free, provided your component is a taxed element (the taxable component of your super benefit will be a taxed element, unless you’re a long-term public servant who is a member of an older public sector super scheme).

If you retire on or after reaching your preservation age, you can receive up to $195,000 (for the 2016/2017 year) of the taxable component of your lump sum, tax-free. The $195,000 low-rate cap is in addition to any tax-free component making up your super benefit. If your superannuation lump sum includes a tax-free component, you also receive that part of the benefit tax-free.

Note: Note that the single low-rate cap applies to all benefits received over your lifetime, rather than a fresh limit applicable for each benefit payment. If you have withdrawn super benefits in the past, you may have used up some, or nearly all, of your low-rate cap of $195,000 (for the 2016/2017 year), or $195,000 (for the 2015/2016 year) or $185,000 (for the 2014/2015 year), which means you may have to pay tax on the taxable component when you take additional lump sums.

Super pension only

By putting the right structure in place and choosing an appropriate superannuation pension, you can avoid paying tax altogether when taking super benefits before the age of 60. Further, any earnings on assets used to finance your super pension are tax-free.

Lump sum and super pension

You can have the best of both worlds. You may receive tax-free lump sums from your benefit’s taxable component, totalling up to $195,000 (for the 2016/2017 year). You can receive even more super as a tax-free lump sum, if your benefit includes a tax-free component.

You can also start a super pension (income stream) before the age of 60 (subject to satisfying the minimum payment rules), which enables you to access a 15% tax offset on the pension payments you receive (assuming you have reached your preservation age). The 15% pension tax offset does not apply to super pensions started before preservation age, or if the super pension is from an untaxed source (certain public sector funds).

Note for public servants: If you are, or were, a long-term public servant, you may receive part of your super as an ‘untaxed benefit’. An untaxed benefit is a benefit that hasn’t been subject to contributions tax or earnings tax, while a ‘taxed benefit’ has been subject to contributions and earnings tax. Some public sector superannuation schemes (now closed to new members) haven’t paid these super taxes on employer contributions that are in excess of Superannuation Guarantee contribution requirements. This is because the additional employer contributions aren’t paid by the Federal Government until the benefit is payable. Untaxed benefits paid from such schemes are then hit with a higher tax when paid out as super benefits (when the Government finally hands over the cash), to recoup the super taxes. If you belong to an ‘untaxed’ super scheme, then check with your super fund about your entitlements.

For more information on how your super benefits are taxed when withdrawing super before the age of 60, including a handy summary table of applicable super taxes, see SuperGuide article Retiring before the age of 60: the tax deal.


  1. Graham Ianson says:

    I retired in 2008 and was receiving an allocated pension of $215 per month. In September 2013 I withdrew $28000 to purchase a new car leaving approx. $38000 remaining.
    I have now been told that my minimum per year is only $1920.
    I am having trouble understanding why the “minimum” has been reduced and not the maximum.

  2. Hi,
    I am turning 55 soon and have just one straightforward Q,
    Can I withdraw(cash out) my superannuation and use it for my own purpose only.
    Thank you

  3. Hi Trish,
    just found out about $165K taxfree withdrawal. My situation is past Preservation Age but less than 60. I have a reasonably urgent need to access some SMSF money.
    Could you answer the following questions please ?
    1) If you have already started a Transition to Retirement pension (TTRP) can the $165k be taken from Pension component or only allocation component. If allocation only I presume I can transfer the Pension component back to Allocation and go from there.
    2) can $165K only be taken from Taxable component. Your website indicates that $165k can be increased from non taxable component but does not expand
    3) what is the administrative procedure to follow to extract $165K from a SMSF?
    4) It appears that you have to be retired to gain access.If so, is it possible to recommence work at some time in the future.
    5) How do previous TTRP’s affect $165K and/or additional withdrawals from tax free component (follow on from question 2)
    Thanks AD
    ps Are these matters covered in Version 2 of Super for Dummies?

  4. Hi
    I am 56 years of age and wishing to retire from teaching.
    I wish to access most of my super in a lump sum payout to start a small business.
    Am I able to do this to start the business but still make some contributions to my account?

  5. Debbie Dixon says:

    Hi Trish

    I came across your website and have so far found it very interesting. I do however have a question to which I have not been able to find an answer anywhere.

    I am currently employed full time as a public servant and have been with the PSS for many years. I have also very recently established a small business which I operate from my home and for which I have a business loan. I want to leave the public service in 4 years time when I turn 55 and take my super as part lump sum and part pension (this will pay off my mortgage) and continue to operate my business. Up until very recently I did not think there would be a problem with idea, however since attending a PSS seminar at my workplace, I am beginning to think that PSS will not recognise my leaving the full time workforce as retirement. Would I be able to leave the workforce and take my super and still operate my business from home? I understand that you are unable to provide financial advice but any information you could provide to help me search for an answer would be greatly appreciated.
    Kind regards

    • Hi
      I am also a public servant, you are correct, the pss has an income or work hour limit before your retirement pension will be suspended after retiring. I am not sure what the limit is but the pss should tell you.
      Secondly you can retire at 55 before your preservation age but you can’t have a lump sum until your preservation age, which for you will be 59/60.
      Ring the pss help line or go to a pss seminar and ask them, they are usually very good.

  6. percy perez says:

    pleeeease help…
    if i salary sacrifice the sale of my house…then wait for the stream of income(planning to retire at 55 years of age) then move overseas.
    the income produced by this money is it treated as income for a non resident income???


  7. Hi Mary
    Thanks for your support of our website, and your positive feedback. We’re very pleased that you found SuperGuide so useful.

  8. mary lucas says:

    Thank you, I was researching government pensions for my sister and found your site. Much to my delight the info on SMSF is fantastic as well so very useful info for me too.
    Easy to understand and use without all the links on the ATO sites. Thanks again I will be a regular visitor. cheers, Mary Lucas

  9. Hi Trish,
    I am a deferred CSS (Public Service) member aged 54. I have been in the corporate world since 1996. I currently plan on retiring at age 58 and was wondering if I should avail myself of the CSS pension at age 55 whilst continuing to contribute to my employers Super Fund for the following 3 years. I currently salary sacrifice $50k PA which includes employer contributions of $18,500 PA. My issue with accessing the CSS pension at age 55 is that it has obviously been affected by the GFC however is starting to rally again now. I thought that if I defer the CSS pension next year and wait until age 58 that the Indexed and Non Indexed pension would be far greater position than what it will be in 2010?

    • Hi Chris
      Thanks for your email. SuperGuide is an information site and, unfortunately, we are not permitted to comment on such a specific set of circumstances.
      Having read your email, the best place to start your search for guidance is the CSS Scheme, and then finding an adviser who is familiar with this scheme to talk you through your options.

      I understood that CSS pensions were based on a set formula rather than linked to market performance, but a pension from the ‘deferred’ scheme may have different rules. Having checked out the following link ( ), I can provide the following information:
      “You can claim your deferred benefit once you reach your minimum retiring age (generally 55). You can claim a CPI-indexed pension (based on 2.5 times your basic contributions and earnings which is multiplied by a factor dependent on your age at claim date) and either:

      a non-indexed pension; or
      a lump sum of your member component.”
      The later you retire, the higher the pension factor applicable, according to the CSS Scheme website.
      You need to confirm your entitlements with CSS.


  10. I retired last year (October 2008 aged 59) for health reasons and cashed in my super as a lump sum, (about $32000). I also earned about $49000 in the year.

    I’ve just had my 2008-2009 tax assessment made, and whilst 0% tax was applied to my superannuation, it was counted as the first part of my earnings for the financial year. This meant that the $49000 that I earned in the same year was pushed up into a higher tax bracket. I did research ATO documents about lump sums, but nowhere was it made even apparent that this would happen.

    The upshot is that my income tax has effectively been increased by about $9500 because I received the lump sum. Is this really how it works? My taxable income was assessed at about $83000, and the income earned was assessed at 40 cents in the dollar at the top end, even though my salary for the year was only $49000.

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