Superannuation in Australia can get confusing. If you are thinking about when and how you can access your superannuation, this may give you some insight:
You can access your super when you reach your preservation age, which is now 60. Once you reach preservation age, you can:
- Fully access super if retired (and not intending to work again).
- Start a transition-to-retirement income stream (TTR) if still working.
- At 65 or older, you can access your super even if still working.
You may access super early in limited situations (e.g. terminal illness, financial hardship etc).
When you take money out of super, the payment is divided into different tax components:
- Tax-free component – usually made up of after-tax (non-concessional) contributions. (e.g. personal super contributions made from your after-tax income and not claimed as a tax deduction).
- Taxable component – this is where “taxed” and “untaxed” elements come in:
- Taxed element: from a fund that has already paid 15% tax on contributions and earnings. (e.g. employer contributions, salary sacrifice).
- Untaxed element: from a fund that has not paid tax on contributions/earnings. (e.g. Government co-contribution, downsizer contribution, some public sector funds).
Why the Difference?
- Taxed element → tax has already been collected by the fund, so the ATO doesn’t tax you much or at all (depending on your age).
- Untaxed element → no tax has been paid yet, so when you take it out, the ATO collects tax from you.
You can usually choose to withdraw your super as a lump sum or as an income stream. The withdrawal option you choose may affect the tax you pay.
The tax-free component (non-concessional contributions) is always tax-free regardless of age and option you choose.
Taxed Element of Taxable Component
When you withdraw at age 60 or over, it is tax-free to you (Caps apply for lump sum withdrawals).
Untaxed Element of Taxable Component
When you withdraw at age 60 or over, it is not completely tax-free. Lump sums are taxed at 15% up to the cap, then at top marginal rate above that. Pensions are generally taxed at your marginal rate less a 10% tax offset.
Big Picture
- Best tax outcome: wait until at least 60 — most withdrawals are tax-free.
- More flexibility: age 65 — no restrictions at all.
- Earlier access: possible but may mean paying tax and risking running out of savings sooner.
It will be worthwhile to seek professional advice before deciding when and how to withdraw your super.
– Heida Bell & Tim Arnold
Posted 01.10.2025
This article is compiled as a helpful guide for your private information and is subject to copyright. We suggest that you do not act solely on the basis of material contained in this article because items are of general nature only and may be liable to misinterpretation in particular circumstances. We recommend that our advice be sought before acting on any of these crucial areas.
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