Are you wondering when you can access your superannuation tax free?
There are a number of instances when you are able to access your super tax free. It will all depend on your age and the tax components that make up your superannuation balance.
The way that you access your superannuation will also impact the tax payable on the withdrawal.
For example, a withdrawal may be taxed differently if it is taken as an income stream compared to a lump sum, despite it being sourced from the same super account at exactly the same age.
The article below will clearly illustrate when you are able to access your super tax free and when tax may be payable.
Let’s go through the ways that you are able to access your superannuation tax free.
Related Posts:
Accessing Super Tax Free: Tax Components
Your superannuation balance is made up of two main tax components. You will usually need to contact your superannuation provider to find out the tax components that make up your superannuation balance and the proportions.
The tax components include the TAX FREE component and the TAXABLE component. The TAXABLE component is further broken down into the ‘Taxable (taxed)’ and the ‘Taxable (untaxed)’ components.
Click to read more about tax on the Taxable component or the Tax Free component.
The tax on each component will differ depending on your age and the form in which you withdraw your super (lump sum withdrawal or pension).
However, we can break it down into two main categories: PRESERVATION AGE to AGE 59 and AGE 60 OR OVER
Accessing Super: Preservation Age to Age 59
Before determining when you can access your super tax free, you first need to figure out when you can access your superannuation.
To access your superannuation, you need to have at least reached your superannuation preservation age.
Your superannuation preservation age can be found in the table below:
| 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 |
| From 1 July 1964 | 60 |
Accessing Super: Tax on Withdrawals 55 – 60
Provided you have reached your preservation age, you may have been able to access your superannuation as early as age 55.
If you are aged between your preservation age and age 60, you are able to access your super and still work. This is done by commencing a transition to retirement (TTR) pension. A TTR Pension is an income stream using some or all of your accumulated superannuation savings. The income that you are able to draw from a TTR Pension is limited to between 4% and 10% of the account balance, as calculated on 1 July of each year (this amount is pro-rata if the income stream is commenced part way through a financial year).
In order to have full access to your superannuation savings between the ages of your preservation age and age 60, you will need to have completely retired from the workforce with no intention of returning to full-time or part-time work. By doing so, you will have met a superannuation definition of retirement condition of release, giving you unrestricted access to your accumulated superannuation savings up until that point. This condition of release allows you to make lump sum withdrawals or commence an account based pension up to your total account value.
The taxation of a TTR Pension or account based pension between your preservation age and age 60 will be as follows (as you can see, a different tax applies to the different tax components that make up your balance):
| Tax Component | Tax Payable |
|---|---|
| Tax-Free | 0% |
| Taxable (taxed) | Taxed at MTR less 15% offset |
| Taxable (untaxed) | MTR no tax offset |
(MTR = Marginal Tax Rate)
The taxation on lump sum withdrawals from superannuation between the ages of 55 and 60 is as follows:
| Tax Component | Tax Payable |
|---|---|
| Tax-Free | 0% |
| Taxable (taxed) up to $195 000 (lifetime amount – indexed) | 0% |
| Taxable (taxed) over $195 000 | 15% |
| Taxable (untaxed) first $195 000 | 15% |
| Taxable (untaxed) $195 000 – $1.415M | 30% |
| Taxable (untaxed) over $1.415M | 45% |
All lump sum and pension income stream withdrawals must be made proportionately from the Tax-Free and Taxable Components.
Related Posts
As you can see in the tables above, between the ages of 55 and 60, you can access your super tax free in some cases; specifically, all of the tax-free component and up to a lifetime indexed cap of $195,000 of the taxable component when taken as a lump sum withdrawal.
In all other cases, withdrawals will be assessed for tax between ages 55 and 60.
Accessing Super: Tax on Withdrawals Over 60
Individuals over the age of 60 receive favourable tax treatment when making withdrawals from superannuation. However, not all withdrawals are tax free.
Again, you need to have met a superannuation condition of release to have full access to superannuation. Given that age 60 guarantees that you have reached your superannuation preservation age, you are automatically eligible to commence a TTR Pension, providing you with limited access to your superannuation, as detailed above.
Related Posts
In order to have full, unrestricted access to your superannuation savings, you need to have ceased an employment arrangement after the age of 60 or permanently retired with no intention of returning to work. Meeting this condition of release will allow you to commence an ordinary account based pension and/or take lump sum withdrawals from your account.
The taxation of a TTR Pension or account based pension for people over age 60 will be as follows (as you can see, a different tax applies to the different tax components that make up your balance):
| Tax Component | Tax Payable |
|---|---|
| Tax-Free | 0% |
| Taxable (taxed) | 0% |
| Taxable (untaxed) | MTR minus a 10% offset |
The taxation on lump sum withdrawals from superannuation for people over age 60 is as follows:
| Tax Component | Tax Payable |
|---|---|
| Tax-Free | 0% |
| Taxable (taxed) | 0% |
| Taxable (untaxed) first $1.415M | 15% |
| Taxable (untaxed) over $1.415M | 45% |
All lump sum and pension income stream withdrawals must be made proportionately from the Tax-Free and Taxable Components.
As you can see in the tables above, when over age 60, you can access your super tax free in some cases; specifically, all of the tax-free component and all of the taxable (taxed) component of lump sum and pension income stream withdrawals. The Taxable (untaxed) component will be assessed for tax.
I hope that this has helped you to understand when you are able to access your superannuation tax free.
