Making a superannuation withdrawal from an accumulation account can be done by anyone who has met a full superannuation condition of release.
It is important to consider any tax implications of making a withdrawal from an accumulation account.
Generally, when an individual retires, they will use their accumulation account savings to start a retirement income stream and begin receiving regular income.
However, for people not wanting to commence an income stream, or for those affected by the Transfer Balance Cap, making lump sum withdrawals from an accumulation account may be more suitable.
A lump sum withdrawal from an accumulation account may be used to cover a one-off capital expense, such as a new car, a holiday or home renovations.
Regular lump sum withdrawals from an accumulation account may be used to supplement minimum pension income payments, for this who are affected by the Transfer Balance Cap.
Withdrawal From An Accumulation Account
Condition of Release
To have unrestricted access to superannuation, an individual must meet the superannuation lump sum withdrawal rules, which includes satisfying a superannuation condition of release.
The most common conditions of release are ‘retirement’ (click here for definition) or ‘reaching age 65’.
There are other conditions of release too, but they generally only allow limited access to retirement savings.
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The retirement definition is defined as ‘retiring after reaching preservation age with no intention of ever returning to full-time or part-time work‘ or ‘having an employment arrangement come to an end after age 60‘.
Meeting any of these definitions will allow a member to convert all of the superannuation savings into unrestricted non-preserved components from that date, meaning full access to funds is available.
If the retirement definitions are not met by age 65, then ‘reaching age 65‘ is considered a condition of release in itself and full unrestricted access to superannuation savings is available from that age.
Tax on a Withdrawal From An Accumulation Account
Depending on the member’s age and components that make up their superannuation balance, there may be tax payable on a withdrawal from an accumulation account.
The age of the member is the first step in calculating tax that may be payable on a withdrawal from an accumulation account.
Specifically, a member aged 60 or over will be taxed differently to a member under age 60.
The tax components of an accumulation balance are the second step in calculating any tax that may be payable on a withdrawal from an accumulation account.
Each dollar within a superannuation accumulation account is classified as either a ‘tax-free component‘ or ‘taxable component‘. Taxable components are further broken up into ‘taxable (taxed)’ and ‘taxable (untaxed)’.
Your superannuation provider can inform you of the tax components that make up your superannuation accumulation balance.
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All lump sum withdrawals from an accumulation account must be made proportionately from each component. A member is unable to choose the tax components that make up the withdrawal.
The table below details how a person is taxed when making a withdrawal from an accumulation account:
| Age of Member | Tax Component | Tax Rate up to Low Rate Cap | Tax Rate Above Low Rate Cap |
|---|---|---|---|
| Under Age 60 | Tax-Free | 0% | 0% |
| Under Age 60 | Taxable (taxed) | 0% | Lower of Marginal Tax Rate or 22% |
| Under Age 60 | Taxable (untaxed) | Lower of Marginal Tax Rate or 17% | Lower of Marginal Tax Rate or 32%^ |
| Age 60 or Over | Tax-Free | 0% | 0% |
| Age 60 or Over | Taxable (taxed) | 0% | 0% |
| Age 60 of Over | Taxable (untaxed) | Lower of Marginal Tax Rate or 17%^ |
^Unless the withdrawal exceeds the untaxed plan cap of $1.480 million in 2018/2019. Any excess withdrawal above the Untaxed Plan Cap is taxed at 47% (including Medicare Levy).
As shown in the table above, making a lump sum withdrawal from super over 60 is generally much more tax-effective than making a lump sum withdrawal while under age 60.
SMSF Lump Sum Withdrawal Rules
The SMSF withdrawal rules are the same superannuation lump sum withdrawal rules that apply to all superannuation accounts and fund members.
All SMSF members are also trustees (or directors of the SMSF corporate trustee) and are therefore responsible for ensuring the SMSF remains compliant with superannuation rules, legislation and regulations. This means that great care should be taken when a member makes a lump sum withdrawal. There can be severe penalties for early release of superannuation savings.
If over Age Pension age, you should consider the implications of making lump sum withdrawals from super on your Centrelink payments.
Can I Withdrawal My Super To Buy A House?
Provided you have met a full superannuation condition of release and your balance is converted to ‘unrestricted non-preserved‘, you should be able to withdrawal your super to buy a house.
However, you need to consider any potential tax implications as a result of the withdrawal, which could reduce the amount you actually receive after paying tax. It is always a good idea to seek professional tax advice prior to making a withdrawal from an accumulation account.
Furthermore, you should also consider your personal circumstances and seek professional advice as to whether buying a house with your super is really the best option in helping you achieve your objectives.
Withdrawal From An Accumulation Account Example
Eddie is 62 years of age and would like to withdrawal $450,000 from his superannuation to buy a house.
Eddie has just retired from work and has no intention of returning to full-time or part-time work ever again.
He has a superannuation accumulation balance of $1,250,000. This balance consists of $350,000 of tax-free components and $900,000 of taxable (taxed) components.
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Having met a superannuation condition of release – retired after reaching his preservation age with no intention of returning to full-time or part-time work – Eddie has unrestricted access to his superannuation.
Being over age 60, Eddie will receive tax-free and taxable (taxed) components without paying any tax. Therefore, his total $450,000 withdrawal will be received tax free.
After the withdrawal, Eddie’s balance will be $800,000 (consisting of $224,000 tax-free component and $576,000 taxable (taxed) component). The tax component makeup of his balance has reduced proportionality, due to all withdrawals being made proportionality from each component.
