Tax on Superannuation Withdrawals After Retirement
How your super withdrawals are taxed depends heavily on your age and the type of benefit you're taking — and for most people over 60, the news is straightforward.
Age 60 and over
For most people aged 60 and over, both lump sum withdrawals and income stream (pension) payments from the taxed component of their super are entirely tax-free, regardless of how much is withdrawn. This is one of the more significant tax advantages of superannuation once you reach this age, and it's a major reason many people wait until after 60 to draw down where practical.
Between preservation age and 60
If you access your super after meeting a condition of release but before turning 60, the tax treatment is a little more involved — lump sum withdrawals up to a set threshold (the "low rate cap") are generally tax-free, with amounts above that threshold taxed at a set rate, while income stream payments are generally taxed at your marginal rate less a tax offset. Because these thresholds are indexed, it's worth confirming current figures for your specific situation.
Untaxed components
Most super benefits are made up of a "taxed" component, but in some circumstances (such as certain public sector or older-style defined benefit schemes) an "untaxed" component can apply, which is taxed differently and can result in a larger tax liability than a standard accumulation account — worth checking specifically if you have any legacy defined benefit or public sector super entitlements.
Tax on investment earnings, separate from withdrawals
Separately from tax on withdrawals themselves, earnings on assets supporting an account-based pension are generally tax-free within the fund once you're in retirement phase (subject to the transfer balance cap) — see Account-Based Pensions Explained — which is a different, ongoing tax benefit from the one-off tax treatment applied to withdrawals.
Why this matters for timing decisions
Understanding the tax difference between withdrawing before and after 60 can meaningfully influence decisions around when to retire, whether to use a transition to retirement strategy in the years before 60 (see Transition to Retirement), and how to structure lump sum versus pension withdrawals (see Lump Sum or Income Stream?).
Frequently asked questions
Is superannuation completely tax-free once I turn 60?
For most people with a standard taxed super account, withdrawals (both lump sum and pension) are tax-free from 60 onward — though this can differ for certain untaxed or defined benefit components, which are less common but worth checking if they apply to you.
Do I need to declare tax-free super withdrawals on my tax return?
Generally, tax-free super benefits from the taxed component after 60 don't need to be included as assessable income, though it's worth confirming your specific circumstances, particularly with any untaxed components involved.
Does the tax treatment differ between a lump sum and pension payments?
Before 60, yes, to some extent (different thresholds and offsets apply); from 60 onward, both are generally tax-free for the taxed component, removing much of the distinction from a pure tax perspective.
Tax treatment of super withdrawals depends on your age, benefit type and components, and thresholds are indexed periodically — confirm current details on ato.gov.au before publishing, and consider professional tax advice for anything involving untaxed or defined benefit components.
This article contains general advice only. It has been prepared without taking into account your personal objectives, financial situation or needs, and does not constitute a recommendation to acquire, hold, or dispose of any financial product. Before acting on this information, consider its appropriateness to your own circumstances, and seek independent financial, tax and/or legal advice, or speak with a licensed financial adviser, before making any decision.
