Reaching preservation age: Taking super, tax and timing

Q: If at 55, I take up to $195,000 out of my super as a lump sum tax free, when I turn 60 will I be able to draw down as a lump sum the rest of my superannuation without having to pay tax as well?

A: For an individual to access preserved super benefits they must satisfy a condition of release, such as or retiring ON OR AFTER REACHING preservation age, or, by turning 65, or, by terminating an employment arrangement on or after the age of 60. Other conditions of release are also available, but the three mentioned above are the most relevant for the question asked.

Note: Preservation age is 55 years for anyone born before July 1960, but if you turned 55 on or after 1 July 2015 (or will turn 55 after June 1960), then your preservation age is not 55 years. Your preservation age will then be at least 56 years, and as old as 60 years (if you were born after June 1964). For more information on your preservation age see SuperGuide article Accessing super: What is my preservation age?

In plain English, what the preservation rules mean is: if an individual was born on or after 1 July 1960, then he or she cannot access super benefits until at least the age of 56 (and retiring), unless they satisfy another condition of release. If an individual is born before July 1960, then his or her preservation age is 55 years.

Assuming an individual has reached preservation age and has access to super benefits, that is they have retired (or satisfied another condition of release), then how a lump sum is taxed depends on the components of the benefit.

A super benefit can be made up of two components:

The tax-free component of the super benefit is tax-free regardless of the age when a person receives the benefit. The taxable component is taxable depending on the age that the individual receives the benefit. If the individual receives the benefit on or after the age of 60, then the entire benefit – both tax-free and taxable component – is free of tax.

If an individual retires, and receives a superannuation lump sum on or after his or her preservation age (but before the age of 60), he or she can take advantage of the low-rate cap, an indexed lifetime limit that applies to an individual’s taxable component. An individual can receive up to $195,000 (for the 2015/2016 year) of the taxable component tax-free, provided the component is a taxed element (nearly all super benefits fall into this category, except certain benefits from public sector funds).

The low-rate cap is in addition to any tax-free component. If the taxable component of a lump sum exceeds the lifetime low-rate cap of $195,000 (for the 2015/2016 year) then tax is payable on the taxable component at the rate of 17.0% (including 2% Medicare levy).

Note: If an individual has withdrawn super benefits in the past, he or she may have used up some, or most, of their low-rate cap which means he or she may have to pay tax on the taxable component when he or she takes additional lump sums.

When an individual turns 60 and the superannuation benefits are from a taxed source (that is, nearly all super benefits except certain benefits from some public sector super funds), then any superannuation lump sums can be taken free of tax, regardless of previous superannuation withdrawals.


  1. I am 56 years old single mum with two dependent children who has been struggling paying rent and now want to get a deposit together for a house and like to withdraw $100,000.00 from my superfund and then look for full time work to pay the mortgage. Please can you advise if the super fund will grant me this amount to pay for the house deposit? Will they consider this on compassionate basis?
    Thanks very much!

  2. Hi Trish, my husband wishes to retire now at 55, wich he may do, but was wondering does he have to access both supers, as he has an endowment personal super plan that matures at 60 wich he would like to leave untill then.
    thanks cheryl

  3. I am over 55 and have been made redundant, leaving my employ at the end of September. I am unsure of future employment and will be unable to recieve any centrelink benefits for quite some time. Given that governments keep changing the goal posts regarding accessing super I feel that the time is near where we will be only able to draw it out as weekly payments versus current lump sum withdrawal. Would it be prudent to take my super out and reinvest in some thing other than a super fund?

  4. Please clarify this TRIP business .. I trun 55 in April next year and whilst I plan on continuing working ( and contributing to my superannuation policy ) till age 60 . Please advise if a can access a small part of my superannuation ( less thn $ 12,000 ) after I trun 55 and not pay tax on the withdrawl



  5. Hi Tirsh
    I will turn 59 this November, i have been advised i need cateract sugery, i understand i can acsess my super as i am over 55, my income is 39k p/a and i have been on work cover for 10 or so years, recently my employer stopped paying me, and their insurnace company now pays my weekly wage until i reach the age of 65.

    My question is, that if i take my full amout of super, that i believe is only around 3k, will this cause problems come tax time?? Will i pay tax on it? Will it count as income? Will it decrease my annaul tax return?
    Id really appreciate any advice you could shed, as the public waiting list is 2 years long



  6. Hi Trish, I am a 56 year old Aboriginal woman. I have been informed that due to the federal governments, Close the Gap policy and given low age expectancies of Indigenous Peoples I may be eligible to drawn down on my super as a lump sum tax free before age 60. Is this correct? Cheers M Morgan

    • Hi Ms Morgan
      Thanks for your comment. I am not aware of any changes to the law to allow automatic tax-free super on all super benefits before the age of 60, although I would strongly support such a policy for Indigenous Peoples, for the reasons you state.
      Note that it is possible to access super benefits from the age of 55 (current preservation age), but if there is a taxable component you may pay some tax. An important fact is that you may not pay tax, even under the age of 60, if your super benefit is less than $165,000, and your super is held with a ‘taxed’ fund (that is, all super funds except some public sector funds).
      Chat with your super fund to find out your options.
      Hope this helps

  7. when you take the 3 or 4 percent drawdown does this mean a drawdown on what the SMSffearns off its investments or does it relate to the entire value of property investments as a whole. In otherwords if all of your investments equal say $800,00 then do you have to draw down 4 percent of that or does it mean say the $50,000 a year you are earning of the $800,000 worth of investments. Sorry this sounds like a dumb question but just unsure. thanks. jill.

  8. Jane Fraser says:

    Hi Trish, I was hoping to withdraw my entitlement of $165k when I reach my preservation age as I will be retired. I had forgotten that I took some super out 20 years ago to pay some debts which I’m sure was unpreserved. How do I find out how much I have used up of my low-rate cap? Does the ATO keep a record of this?


  9. trish goldspring says:

    dear trish
    I am hopeing that you will be able to help us with some concrete answers to our problem

    My husband turned 60yrs of age last october 2010, and has $80,000 in super fund
    we would like to withdraw his entire super as we need the funds to purchase a house,
    due to his age we need a deposit of $100,000 for deposit for us to receive the bank loan,
    as he is currently employed full time and will be working for many years yet,
    we have sent the super fund all the documents to receive the funds. they have received all
    the legal documents, but now saying that he has to resign from his current employer before he can receive the money from the super, and he will then be able to reapply for his job again and that is the only he can get the money,
    We are theunderstanding that because he is 60yrs of age he is legally entilted to the money
    can he still receive the super if he is still working full time, could you please reply asap as we only a very small amount of time as we need to exchange contracts for the house asap many thanks

  10. I will be 63 on 23rd December, I am self employed & have a super fund with Macquarrie which I am receiving a transition to retirement income stream, & I also have a SMSF. Can I take a lump payment from the SMSF tax free & if so what is the maximum amount.

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