In this guide
If you’re 60+ and have access to your super, you can choose to withdraw a lump sum at any time. What’s more, for most people it will be tax-free.
A lump sum payment can be useful if you need to repay debts such as your mortgage, or you have some large expenses coming up. Alternatively, you may be considering a gift to family members or a recontribution strategy.
So, what do you need to know before your take your money and run?
When you can withdraw a lump sum
Unrestricted access to super is available:
- When you turn 65, including if you’re still working or have never worked
- When you’re at least 60 and have permanently retired from work
- When you leave a job after your 60th birthday, including if you’re returning to work.
There are special circumstances when super can be withdrawn early.
How much and how often you can withdraw
Once you have met one of the criteria above, you may withdraw a lump sum of any amount, up to your entire balance.
There is no limit to the number of withdrawals. You might take a large amount when you retire to go on that once-in-a-lifetime holiday and then access more anytime you’re making a large purchase.
When tax applies
Most Australians only have money in super funds that pay tax on contributions and investment earnings while their members are accumulating savings. If you’re one of them, you won’t pay any tax on lump sum withdrawals from your super after you’ve turned 60.
If you’re withdrawing from an untaxed (constitutionally protected) super scheme, the untaxed element will attract tax at the rate of 15% up to the untaxed plan cap ($1.865 million in 2025–26) and 45% for any additional amount. The Medicare Levy applies in addition to these rates.
Taking a lump sum from an income stream vs an accumulation account
The super system has two phases: the retirement phase and the accumulation phase. The accumulation phase is where your super builds up while you’re under 60 and the retirement phase begins when you choose to start an income stream for retirement after turning 60.
The advantage of the retirement phase is that investment earnings are tax-free, versus 15% tax on earnings in the accumulation phase. Any amount you don’t withdraw from super or use to start an income stream stays in the accumulation phase after you retire.
Free eBook
Retirement planning for beginners
Our easy-to-follow guide walks you through the fundamentals, giving you the confidence to start your own retirement plans.
"*" indicates required fields
If you have both accumulation and retirement phase accounts, you can choose which you would like to withdraw your lump sum from.
Most people choose to withdraw as little as possible from the retirement phase, and invest as much as possible there, to maximise the proportion of their super balance that generates tax-free investment earnings. However, there are other considerations such as whether reducing the balance in retirement phase would improve Centrelink entitlements for yourself or your partner.
Withdrawing a lump sum from an accumulation account is simple. You will need to complete a payment request from your super fund, either using a paper form or by logging into your account online. Part of this process is to provide details of your ID documents so your identity can be verified. If you’ve made withdrawals in the past, you may not need to verify your identity again.
If you’re withdrawing from a simple account-based pension, you can choose whether to have your additional payment treated as a lump sum or pension payment. Most super funds will allow you to make your request online. If you don’t specify, your withdrawal will generally be treated as an additional pension payment.
If you choose to have the payment treated as a lump sum payment, it will not be counted towards your minimum annual withdrawal, and your provider may need to process a pro-rata minimum pension payment before completing your lump sum withdrawal request.
If you have a fixed-term or lifetime income stream, ask your provider whether you can withdraw a lump sum and what it means for your future income payments.
Free eBook
How to maximise your Age Pension
Learn tips that help you make the most of the Age Pension so your retirement savings last longer.
"*" indicates required fields
Why take a lump sum?
Apart from debts and expenses, there are some strategic reasons a person may take a lump sum from super.
- Gifting the amount withdrawn to another person, or using it to contribute to a younger partner’s super, may improve your Age Pension entitlement.
- The lump sum withdrawn could be contributed back to your (or your partner’s) super to reduce tax to beneficiaries after your death or increase the amount you as a couple can transfer into the retirement phase. This is called a recontribution strategy.
- Some people cash their entire super balance if they’re aware they will pass away within a short time. Doing this means adult children and other non-dependent beneficiaries who inherit the amount you withdrew won’t pay tax on it, and the process of claiming the balance from super after death can be avoided.
Downsides of taking a lump sum
If you invest money you have withdrawn outside the super system, any returns on your investment will be taxed as normal income at your marginal rate, not at concessional super rates (a maximum rate of 15% in an accumulation account and 0% in a retirement income stream). For many people, this means more tax if money is invested outside super.
Holding money outside super could affect your (or your partner’s) Centrelink entitlements if you are under 67. While you’re under 67, anything you have in a super account in the accumulation phase is not counted in Centrelink’s means tests.
If you change your mind and want to add money back into the super system, it may not be possible. Your contributions are limited by the annual caps and when you’re 75+, you can’t contribute to super at all unless you sell your home and qualify to make a downsizer contribution.
If you’ve spent the money you withdrew, the risk of not having enough retirement savings to provide a comfortable income for life or fund a move into aged care increases.
The bottom line
You’ve worked hard to accumulate your super savings and once you’ve met the requirements to access your balance, you can choose how to use it, including withdrawing as much as you wish in one or more lump sums.
Before acting, it’s important to consider the implications for your tax and Centrelink position and any strategic reason for the withdrawal, such as a recontribution strategy or gift.
For help deciding, you can speak to a licensed financial planner.
Leave a Reply
You must be logged in to post a comment.