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Tax on Super Withdrawals
Understanding how your super is taxed when you take it out.
The good news: most Australians pay no tax on their super withdrawals after age 60. But the rules are more nuanced than that simple headline — your tax treatment depends on your age, the type of benefit, and the components that make up your super.
This page explains the tax rules so you know what to expect when you access your retirement savings.
✅ The Simple Version (For Most People)
If you're 60 or older and your super is from a taxed fund (which covers most industry and retail super funds), your withdrawals are completely tax-free — whether you take a lump sum or receive pension payments.
Tax Treatment by Age
(from taxed funds)
(depends on components)
(plus Medicare levy)
Understanding Super Components
Every dollar in your super belongs to one of two components. This matters because they're taxed differently:
🟢 Tax-Free Component
Money that has already been taxed before entering super:
- Non-concessional contributions (after-tax)
- Government co-contributions
- Pre-July 1983 contributions
- Certain CGT-exempt amounts
Always tax-free when withdrawn (regardless of age)
🟠 Taxable Component
Money that has not been fully taxed:
- Concessional contributions (before-tax, SG, salary sacrifice)
- Investment earnings in accumulation
- Insurance proceeds (TPD, death)
Tax-free after 60; may be taxed if younger
Your super statement shows your component breakdown. Most people have predominantly taxable component because employer contributions and earnings make up most of their balance.
Tax on Lump Sum Withdrawals
From a Taxed Fund (Most Common)
| Your Age | Tax-Free Component | Taxable Component |
|---|---|---|
| 60 and over | Tax-free | Tax-free |
| Preservation age to 59 | Tax-free |
First : Tax-free Above cap: 15% + Medicare levy |
| Under preservation age | Tax-free | 20% + Medicare levy (22% total) |
💡 The Low Rate Cap
If you're between preservation age and 59, the first of taxable component you withdraw as a lump sum over your lifetime is tax-free. This is called the low rate cap.
Once you've used this cap, any further taxable component lump sums are taxed at 15% (plus Medicare levy). The cap is a lifetime limit, not per year.
Example: Maria, Age 58
Maria withdraws a $300,000 lump sum. Her component split is:
- Tax-free component: $50,000
- Taxable component: $250,000
Tax calculation:
- Tax-free component ($50,000): No tax
- Taxable component — first : No tax (low rate cap)
- Taxable component — remaining $5,000: 15% + 2% Medicare = $850
Total tax: $850 on a $300,000 withdrawal
If Maria waits until she's 60, the entire withdrawal would be tax-free.
Tax on Pension Payments (Income Streams)
The tax rules for pension payments are similar to lump sums, but with some differences:
| Your Age | Tax Treatment |
|---|---|
| 60 and over | Completely tax-free (from taxed fund) |
| Preservation age to 59 | Taxable component: Marginal tax rate, less 15% tax offset |
| Under preservation age | Taxable component: Marginal tax rate (no offset) |
⚠️ No Low Rate Cap for Pensions
The low rate cap () only applies to lump sums, not pension payments. If you're under 60 and receiving pension payments, the taxable component is added to your assessable income (though you get a 15% tax offset if you're between preservation age and 59).
Untaxed Funds: Different Rules
The rules above apply to taxed funds (industry funds, retail funds, most employer funds). Some public sector funds and defined benefit schemes are untaxed funds — contributions weren't taxed at 15% on the way in.
🏛️ Untaxed Fund Withdrawals (Age 60+)
If you're withdrawing from an untaxed fund:
- Lump sums: The untaxed plan cap amount (indexed annually) is taxed at 15%; above that at 30%
- Pension payments: 10% tax is withheld on the untaxed element
This is why some public servants face unexpected tax on their super — their fund was untaxed, so the tax is collected on the way out instead.
Special Circumstances
Terminal Medical Condition
If you access super due to a terminal medical condition (two doctors certify life expectancy under 24 months), the entire withdrawal is tax-free — regardless of your age or components.
Total and Permanent Disability (TPD)
TPD payments have the same tax treatment as normal withdrawals based on your age, but you may receive a special tax-free disability component that increases the tax-free portion.
Death Benefits
Tax on death benefits depends on who receives them:
- Tax dependant (spouse, child under 18, financial dependant): Tax-free
- Non-tax dependant (adult child, other): Taxable component may be taxed at 15-17%
Summary: The Key Points
| Situation | Tax Treatment |
|---|---|
| Age 60+, taxed fund | Tax-free (lump sums and pensions) |
| Preservation age to 59, lump sum | Tax-free component: nil; Taxable: low rate cap then 15%+ML |
| Preservation age to 59, pension | Marginal rate with 15% offset on taxable component |
| Under preservation age | 20-22% on taxable lump sums; marginal rate on pension |
| Terminal illness | Tax-free at any age |
| Death benefit to dependant | Tax-free |
| Death benefit to non-dependant | Taxable component: 15% + Medicare levy |
Questions About Tax on Your Super?
The rules vary based on your specific circumstances. Get clarity before you make decisions.
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Disclaimer
NOT PERSONAL ADVICE — tax rules are complex and individual circumstances vary. Consult a tax professional or financial adviser for your specific situation.