Before withdrawing your superannuation to shout the bar a bunch of pina coladas, you should first understand the potential tax on super withdrawals. Because, let’s face it, tax-free pina coladas taste so much better!
Tax on Super Withdrawals
Okay, talk to me. Are you thinking of withdrawing your super as a lump sum or as a pension payment? Either way, lucky for you, I’ve got both covered. And, there’s a few tricks, so pay attention.
Also, please note that I have not included the Medicare Levy (currently 2%) on each tax rate. This should be added on top.
Tax on Lump Sum Super Withdrawals
The tax on lump sum withdrawals will depend on your age and your superannuation balance tax components.
You will need to contact your superannuation provider to find out the tax components of your balance. Also, when I refer to the taxable component, I am referring to the common taxable (taxed) component, otherwise I will say the taxable (untaxed) component.
All lump sum withdrawals must be made proportionately from each tax component based on the proportions on the day of the withdrawal.
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If you are aged 60 or over, all lump sum super withdrawals will be received tax free.
If you are under age 60 (but above your preservation age), the tax-free portion of your lump sum withdrawal will be received tax free. The taxable portion of the withdrawal will also be received tax-free up to the lifetime low rate cap, which is $235,000 for the 2023/24 financial year. However, any taxable component portion of a withdrawal above this lifetime cap will be taxed at 15%.
Read more: Superannuation Lump Sum Withdrawal Rules: Your Complete Guide
Other Considerations: Tax on Lump Sum Withdrawals
Under Preservation Age
If you are under your superannuation preservation age, yet eligible to access your super, you do not gain access to the lifetime low rate cap and the total taxable portion of the withdrawal is taxed at the lower of your individual tax rate and 20%.
| Date of Birth | Preservation Age |
|---|---|
| Before 1 July 1960 | 55 |
| 1 July 1960 – 30 June 1961 | 56 |
| 1 July 1961 – 30 June 1962 | 57 |
| 1 July 1962 – 30 June 1963 | 58 |
| 1 July 1963 – 30 June 1964 | 59 |
| After 30 June 1964 | 60 |
Taxable (Untaxed) Component
If your balance includes a taxable (untaxed) component and you are aged 60 or over, the untaxed portion of the withdrawal will be taxed at 15% on the first $1.705 million (untaxed plan cap) and 45% on the excess.
If you are over your preservation age, but under age 60, the untaxed portion of the withdrawal will be taxed at 15% on the first $235,000; 30% on the amount up to $1.705 million and 45% on the excess.
If you are under your preservation age, the untaxed portion of the withdrawal will be taxed at the lower of your individual tax rate and 30% on the first $1.705 million and 45% on the excess.
These are lifetime withdrawal cap amounts.
This video explains when you can access your super tax-free:
Tax on Pension Payments
Similar to lump sum withdrawals, tax on superannuation pension payment withdrawals will be determined by your age and the tax components that make up your pension balance.
All pension payments must be made proportionately from each tax component, based on the proportions of your superannuation pension balance.
The tax-free portion of your income stream will always be received tax-free regardless of your age.
If you have reached your preservation age, yet are under age 60, the taxable portion of the withdrawal will be taxed (together with any other sources of taxable income) at your individual tax rate. However, you will receive a tax offset equal to 15% of the taxable portion of the payment.
Other Considerations: Tax on Super Pension Payments
Under Preservation Age
If you are under your superannuation preservation age, the taxable portion of a pension payment will be taxed at your individual tax rate with no 15% offset, unless it is a disability super benefit)
Taxable (Untaxed) Component
If part of your pension payment includes a taxable (untaxed) component, this portion will be taxed at your individual tax rate, regardless of age.
As you can see, there’s quite a few things you need to take into account in determining how much you will pay on a superannuation withdrawal, whether it’s a lump sum withdrawal or a pension payment.
Our financial planning firm, Toro Wealth, specialises solely in helping 50 to 70 year-olds optimise their financial position in the lead up to retirement. If you’re interested in learning more about our service and cost, click here.
Discover More Content on SuperGuy:
- How Much Superannuation Should I Have at My Age?
- Superannuation Advice: Your Complete Resource
- How Much Can I Withdraw From Super Tax Free?
- What Is Super Contributions Tax?
- Tax On Super
- Superannuation Minimum Drawdown
Hi, I hope you enjoyed reading this article.
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Thanks for stopping by - Chris
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