Your tax guide to accessing your super over age 60

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

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

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

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 retirement or starting a transition-to-retirement pension.

When you meet a condition of release and apply to access your super, you can usually choose to withdraw a lump sum, an income stream or a combination of both. If you’re using the transition-to-retirement condition of release, the only option is an income stream. You may also leave money in your original super account after retirement if you wish.

1. Withdrawing 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 super are taxed at your marginal tax rate, which can be as high as 45% (plus the Medicare levy).

2. Starting 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. Investment earnings in super income streams are tax free, except in a transition-to-retirement pension where earnings are taxed at 15% until you retire or reach age 65.

Payments from taxed funds

Most people are members of taxed super funds. These funds pay tax on contributions and investment earnings. You don’t pay tax on withdrawals from these funds after you turn 60, except in the situations explained below:

1. Income from a capped defined benefit income stream