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Do I pay tax when I withdraw my super?

09 Jan 2023 5 min read

Depending on when you access your super, you may have to pay tax on a part of what you withdraw. This article explains when and how tax may apply when withdrawing your super, so you can access your retirement savings with confidence.

Who pays tax when withdrawing from super?

Tax on super withdrawals depends on:

  • the type of withdrawal you make
  • the type of super account you’re withdrawing from and
  • your age.

We’ll go through each of these factors to help you work out if tax applies to your withdrawal. But first, let’s look at how your super is split into taxable and tax-free components.

Which parts of my super are taxable and tax free?

The taxable and tax-free components of your super balance are calculated based on the kinds of contributions you’ve made to your account.

Taxable super contributions include contributions:

Super contributions that make up the tax-free component include:

Once you turn 60, the taxable and tax-free components are irrelevant to any withdrawals you make. That is, those 60 and over don’t pay tax on a super withdrawal, no matter what the account or withdrawal type.

The main ways to withdraw your super

There are multiple ways you can withdraw super, with various conditions for each, but the 2 main ways are through an income stream or a lump sum payment.

A super income stream is a pension or annuity paid from your super balance. The income stream is facilitated by an income or pension account offered by your super fund, like the NGS Income account. Rather than receiving all your super at once, you’ll get regular payments — similar to your salary — until your super balance is exhausted. If you’re one for big spending, this could be a smart option to ensure you don’t use all your retirement savings at once.

Alternatively, you can withdraw your super as one or more lump sum payments.

You may wish to access your super both ways, by starting an income stream and making lump sum withdrawals whenever you need to.

How your age affects your tax

Those aged 60 or over don’t pay tax on any money withdrawn from super. However, if you are under 60, you will likely have to pay tax. How much tax you pay depends on whether you have reached your preservation age.

Your preservation age is based on your date of birth as set out below. If you were born before 1 July 1963, you’ve already reached your preservation age.

Your date of birth Preservation age
1 July 1963–30 June 1964 59
After 30 June 1964 60

Once you know if you’ve reached your preservation age, you’ll need to look at your super account type and withdrawal type to work out how you’ll be taxed.

Under preservation age? Here’s how tax applies

If you’re under your preservation age at the time you withdraw funds from super, the tax applicable will depend on your account type.

  Tax applicable on taxable component
  Accumulation account Transition to retirement account Income or pension account
Withdraw as an income stream or lump sum The lower of 20% (plus Medicare levy) or your marginal tax rate Your marginal tax rate with no tax offset Your marginal tax rate with no tax offset

Tax for those between preservation age and 60

If you have reached preservation age but are still under 60, the tax applicable on your super withdrawal is as follows.

  Tax applicable on taxable component
  Accumulation account Transition to retirement account Income or pension account
Withdraw as an income stream N/A Your marginal tax rate less a 15% tax offset Your marginal tax rate less a 15% tax offset
Withdraw as a lump sum Nil on the first $225,000 of the taxable portion of your withdrawal

PLUS

the lower of:
• 15% (plus Medicare levy)
• your marginal tax rate
on the taxable portion of any amount over $225,000
N/A Nil on the first $225,000 of the taxable portion of your withdrawal and 15% on any taxable component over that amount

Frequently asked questions

What if I am with an untaxed super fund?

Some super funds (known as ‘untaxed’ funds) don’t pay any tax on contributions. To offset this, the government will charge you tax when you withdraw your super balance, even if you are over 60.

If you are with an untaxed super fund, you should check with them to see how withdrawals are taxed.

You can learn more about super death benefits and how they are taxed by reading our information sheet How to make a death benefit claim.

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