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Will I pay tax on my super when I retire?

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Tax is often the last thing on our minds when we're planning for retirement. But it's important to understand how your retirement income will be taxed, so you can make the most of your savings.

The good news is that super is a tax-effective way of building wealth for your retirement, and the tax benefits become even more pronounced when you retire.

The tax treatment of payments from superannuation depends on factors such as your age and circumstances at the time they are received.

On or after age 60

No tax is payable on either lump sum payments or account-based pension payments received on or after age 60.

By converting your super account to an account-based pension account, investment earnings – including realised net capital gains – are generally tax-free within your pension account.

After reaching your preservation age, but before age 60

If you have reached your preservation age but are not yet 60, the tax treatment depends on the type of payment (either income or lump sum) and the components of the payment (either tax-free or taxable).

The tax-free component includes personal contributions you made from your after-tax income unless you claimed a tax deduction for them. The taxable component of your super is the total value of your account less the tax-free component.

The tax treatment of payments made from super after reaching your preservation age but before age 60 are:

Income payments from your account-based pension
Tax-free component Tax-free
Taxable component Taxable at your marginal tax rate (plus Medicare levy), less 15% pension offset


Tax on lump sum payments
Tax-free component Tax-free
Taxable component 2023/2024 financial year: First $235,000 is tax-free and the balance is taxed at 15% (plus Medicare levy)


Generally, your super benefit will include both a tax-free and a taxable component. When you make a withdrawal, your provider calculates the components of the withdrawal based on the proportion of components that make up the total value of your account.

The amount of each component is calculated at the following times:

  • Each lump sum payment from a super account – just before it is paid
  • Income payments from a pension account – when the income stream started
  • Lump-sum payments from a pension account – when the income stream started
  • An income stream commuted back into your super – before a new benefit is paid

You can't choose to withdraw only from the tax-free component of your account.

The low rate cap amount (currently $235,000) is a lifetime cap which is reduced by any amount previously applied to the low rate threshold.

Before reaching your preservation age

There are limited circumstances in which you can access your super before your preservation age including financial hardship and compassionate grounds.

The tax treatment of payments made from super before reaching your preservation age are:

Income payments from your account-based pension
Tax-free component Tax-free
Taxable component Taxable at your marginal tax rate (plus Medicare levy)


Tax on lump sum payments
Tax-free component Tax-free
Taxable component Taxed at 20% (plus Medicare levy)


Tax on disability super benefit

A tax offset of 15% is generally available on disability super benefits paid as a pension to members under age 60.

Tax on terminal illness benefits

Generally no tax is payable on benefits that are paid to you under the ‘terminal medical condition’ condition of release.

Further information

For further information please speak to your financial adviser or call us on 1800 022 033 during business hours (Sydney time).

However, as a general starting point, you can use the Money Smart calculator to work out:

  • How long your account-based pension will last
  • How investment returns will affect your pension balance

Read more retirement articles here.

This information has been prepared by Perpetual Superannuation Limited (PSL) ABN 84 008 416 831, AFSL 225246, RSE L0003315 as trustee of the Perpetual’s Select Superannuation Fund (ABN 51 068 260 563) and Perpetual WealthFocus Superannuation Fund (ABN 41 772 007 500). It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. Any tax information contained in this article is not tax advice (and should not be relied on as such) and is believed to be accurate at the time of compilation. You should consider, with a financial adviser, whether the information is suitable for your circumstances. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information. The Product Disclosure Statement (PDS) for the relevant Fund, issued by PSL, should be considered before deciding whether to acquire or hold units in any of the options. The PDSs and Target Market Determinations can be obtained by calling 1800 022 033 or visiting out website www.perpetual.com.au. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund/option or the return of an investor’s capital.