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Home / How super works / Super and tax / Your tax guide to accessing your super over age 60

Your tax guide to accessing your super over age 60

July 16, 2020 by Janine Mace Leave a Comment

Reading time: 4 minutes

On this page

  • Getting your super benefit: Meet a condition of release
  • Withdrawing your super benefit after 60
  • Lump sum or income stream: Which is better?
  • Limits on income stream amounts you can access
  • Withdrawing from a defined benefit super fund
  • Tax time: Here’s what you need to know about your tax return
  • Age Pension and super benefits: How do they interact?

When it comes to the super system, reaching age 60 triggers an important change. It means you can withdraw you super benefits more easily and for most people it is tax-free.

This represents a big change from the tax position if you withdraw your benefits before age 60, as tax is usually payable on some part of your super benefit.

To help you understand what can be a confusing area, SuperGuide has put together an overview of the rules for withdrawing your benefits on or after your 60th birthday.

See also: Your tax guide to accessing your super under age 60

Getting your super benefit: Meet a condition of release

There are strict rules governing your ability to access your super savings, as the super system is designed to provide you with income in your retirement.

Once you reach age 60 it’s more straightforward, but you still need to meet a condition of release. At this age, common conditions of release include retiring from the workforce or starting a transition-to-retirement pension.


Need to know: You can access your super when you reach age 65 even if you have not retired, as reaching this age is considered a condition of release. This allows you to access your benefit, which can be paid as either a super pension or a lump sum.

For more information, read SuperGuide article When can I access my super? All conditions of release explained.


Withdrawing your super benefit after 60

A big attraction of taking your super benefit after age 60 is that for most people not only is your money free of any benefit payments tax, it’s also free of income tax if you take it as an income stream.


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This means your super pension payments aren’t added to your assessable income if you’re still working, or have other sources of income.


Super tip: If you are currently receiving any payments from Centrelink, it’s a good idea to check before you access your super benefit as it may affect your entitlement.

To find out more, contact Centrelink on 13 23 00 or check the Centrelink website.


Once you satisfy a condition of release and access your super savings, you have several options (or a mix of the options):

1. Leave some or all of your savings in your account

Even if you take a lump sum, most super funds are happy to continue looking after your remaining retirement savings. Many funds offer super pension accounts with a wide choice of investment options. If you are satisfied with your current super fund, this may be a good option to consider.

2. Withdraw a lump sum

This is a single payment that withdraws some or all of your super. Taking a lump sum means the money is no longer within the super system, so if you invest it, any return on your investment will not be taxed as super savings.

This means the concessional tax rate of 15% on your investment earnings will no longer apply. Instead, your investment earnings outside the super system are taxed at your marginal tax rate, which can be as high as 45% (plus the Medicare levy).

3. Start an income stream (super pension or annuity)

If you decide to take an income stream, you receive a series of regular payments from your super fund. These must be paid at least annually and must meet minimum annual payment rules.

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Need to know: When choosing whether to take a lump sum or income stream from your super account, consider getting professional advice from an independent financial adviser or tax professional.

Tax and super are very complicated and taking a lump sum may not necessarily be the best strategy for you, as there can be tax advantages with establishing a retirement income stream.


Lump sum or income stream: Which is better?

Unfortunately, there is no easy answer to this question, as it depends on your personal circumstances and age.

  • If you are aged 60 or over and decide to take a lump sum, for most people all your lump sum benefits are tax-free.
  • If you are aged 60 or over and decide to take a super pension, all your pension payments are tax-free unless you are a member of a small number of defined benefit super funds.

Limits on income stream amounts you can access

There are some important rules governing super income streams you need to bear in mind:

1. Minimum pension payments

If you decide to take a super pension, you must receive income stream payments at least annually and they must be at least the minimum annual amount set by the government.

The minimum pension payment is a set percentage of your account balance at commencement, or at 1 July for every subsequent year. This varies by age, increasing as your age increases.

Learn more about the minimum pension payment rates (including calculator).

There is no maximum amount you need to take, unless it is a transition-to-retirement pension not in the retirement phase. In this case, the maximum amount is 10% of the account balance.

2. Transfer balance cap (TBC)

The TBC applies from 1 July 2017 and is a limit on the total amount of super savings you can transfer into the retirement phase to pay a super pension (like an account-based pension). The TBC is set at $1.6 million for 2020/21 and is indexed in line with the Consumer Price Index.

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Under the super rules, you can commence multiple super income streams in retirement phase as long as you remain below the TBC. All your super income streams in retirement phase are included and it does not matter how many super accounts or funds you have.

For more information, read SuperGuide article Definitive guide to the $1.6 million transfer balance cap.

Withdrawing from a defined benefit super fund

Defined benefit super funds are usually large corporate or government employer super funds and the tax rules for these funds are generally the same as for other types of super funds.

Different tax rates apply, however, if you are a member of an untaxed defined benefit scheme or a constitutionally protected fund (CPF). These are mainly public sector schemes like Triple S in South Australia and West State Super and Gold State Super in WA.

Unlike the majority of super funds that pay tax on behalf of their members on a regular basis, untaxed funds and CPFs don’t pay tax on contributions or earnings until the member leaves the fund.


Need to know: Calculating the tax applying to the withdrawal of super benefits from an untaxed defined benefit super fund is complex and you should contact your super fund, an experienced tax accountant or an independent financial adviser for advice before applying to withdraw your benefit.


In general, if a member of an untaxed scheme or CPF is over age 60 and withdraws a lump sum, they pay 15% tax on the untaxed component of their super benefit up to the untaxed plan cap ($1.565 million in 2020/21). Any amount over this cap is taxed at the top marginal tax rate (45% in 2020/21) plus the Medicare levy. There is no tax payable on any taxed component of their benefit.

Tax time: Here’s what you need to know about your tax return

Generally, if you take a lump sum from your super account after you reach age 60, you will not need to include it in your annual income tax return as your super fund will have notified the ATO.


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Although super income stream payments are tax-free once you are aged 60 and over (other than the two exceptions noted above), you may still need to declare some elements of the income stream in your tax return.


Patrick is aged 62 and receives $80,000 a year in regular pension payments from his taxed super fund. He also works two days a week as a consultant for a legal practice and earned $18,000 in non-super income in 2019/20.

As the $80,000 is from an account-based pension, all of Patrick’s super pension payments are tax-free. The $18,000 he earned during 2019/20 was below the threshold for paying income tax, so his tax bill for 2019/20 was zero.The defined benefit income cap is equal to the general Transfer Balance Cap ($1.6 million in 2018/19 and 2019/20) divided by 16.


Age Pension and super benefits: How do they interact?

Taking either a lump sum or an income stream from your super account can affect your entitlement to either a full or part government-funded Age Pension.

Both your income and assets are counted to determine if you are eligible to receive an Age Pension. So if you have withdrawn your super benefits as either a lump sum or an income stream, the money will be counted under the assets and income tests.

For more information see SuperGuide article How does superannuation affect the Age Pension?.


Need to know: The way the income and assets tests apply to super benefits is quite complex, so it’s a good idea to seek advice from an independent financial adviser before applying to withdraw your super benefit.

You can also check the Department of Human Services website for more information on how super benefits are assessed under the income and assets test.


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Learn more about accessing super in the following SuperGuide articles:

Accessing super: Reaching preservation age and retiring

October 9, 2020

What age can I access my super (Preservation Age)?

October 6, 2020

Accessing super: Ceasing employment after 60

October 6, 2020

Accessing super: Reaching age 65

October 6, 2020

Early release of super due to COVID-19 (coronavirus)

July 23, 2020

When can I access my super? All conditions of release explained

April 1, 2020

Guide to transition-to-retirement pensions (TTRs or TRISs)

March 22, 2020

Retirement age calculator: When can you access your super or the Age Pension?

August 7, 2019

Learn more about super and tax in the following SuperGuide articles:

Tax in SMSFs and regular super funds: Which is better?

February 11, 2021

Super for beginners: How superannuation is taxed

December 3, 2020

How the Division 293 tax works: Super surcharge for high earners

September 1, 2020

Your tax guide to accessing your super under age 60

July 16, 2020

How do tax-deductible superannuation contributions work?

February 1, 2020

Proportioning rule and super tax: What it is and why it matters

July 12, 2019

A simple guide to what tax is payable on super death benefits

July 12, 2019

SMSFs and capital gains tax (CGT)

April 5, 2019

The definitive SMSF guide to franked dividends

April 2, 2019

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All information on SuperGuide is general in nature only and does not take into account your personal objectives, financial situation or needs.

You should consider whether any information on SuperGuide is appropriate to you before acting on it.

If SuperGuide refers to a financial product you should obtain the relevant product disclosure statement (PDS) or seek personal financial advice before making any investment decisions.

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