When you’re ready to access your super, you have several options for how to take it: a lump sum, a regular income stream (account-based pension), or a mix of both. The right approach depends on your age, tax situation, income needs, and Centrelink considerations.
This guide covers every withdrawal scenario, the tax treatment at each age, and how to process a withdrawal through your fund.
Your Withdrawal Options
Option 1 — Lump Sum
A lump sum is a one-off withdrawal of some or all of your super balance. You can take the full balance or a partial amount.
Advantages:
- Flexible — spend, invest, or pay off debt as you choose
- No ongoing fund fees on the withdrawn amount
- May be tax-free after age 60
Disadvantages:
- Lump sum is no longer protected in the super environment — it becomes assessable for the Age Pension means test (both income and assets)
- You lose the tax-advantaged super wrapper for the withdrawn amount
- If spent quickly, may leave inadequate retirement income
Option 2 — Account-Based Pension (Income Stream)
An account-based pension converts your super accumulation account into a pension (drawdown) account. You draw regular payments — monthly, quarterly, or annually — while the remaining balance stays invested.
Advantages:
- Investment earnings in the pension phase are completely tax-free
- Regular income mimics a salary, making retirement budgeting easier
- Minimum annual drawdown rules apply (see below) but there is no maximum
- Partial amounts can remain in accumulation or be drawn as lump sums
Disadvantages:
- Balance depletes over time — unlike a defined benefit, there is no guaranteed payment for life (unless you purchase a lifetime annuity)
- Subject to Age Pension means testing
Option 3 — Combination
Most retirees use a combination — taking some as a lump sum (e.g. to pay off a mortgage) and converting the remainder to an account-based pension. This is the most flexible approach and can be tailored to your specific needs.
Minimum Annual Pension Drawdown
Once you start an account-based pension, the government requires you to draw a minimum amount each year, expressed as a percentage of your account balance. You must draw at least this amount annually or the pension account may lose its tax-exempt status.
| Age | Minimum Annual Drawdown (% of balance) |
|---|---|
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95+ | 14% |
There is no maximum drawdown (unless you are in a Transition to Retirement account, where the cap is 10%).
Tax on Super Withdrawals
Tax treatment depends on your age and the components of your super balance.
The Two Components
Super benefits are made up of two components:
- Tax-free component: Contributions made from after-tax money (non-concessional contributions, government co-contributions)
- Taxable component: Concessional contributions (employer SG, salary sacrifice, personal deductible), plus fund earnings
Your fund will tell you the split between the two components.
Tax Rates by Age
| Age | Tax-Free Component | Taxable Component (Lump Sum) |
|---|---|---|
| Under preservation age | Nil | 20% + Medicare levy |
| Preservation age to 59 | Nil | 0% up to $235,000 (low-rate cap); 15% + Medicare levy above |
| 60 and over | Nil | Nil |
After age 60, all super withdrawals — both lump sums and pension payments — are completely tax-free. This is one of the most significant tax concessions in Australia’s retirement system.
Low-rate cap is $235,000 in FY2025–26 (indexed annually by AWOTE). This is a lifetime cap, not an annual cap. Source: ATO.
Tax on Account-Based Pension Payments
| Age | Tax on Pension Payments |
|---|---|
| Under 60 (TTR) | Taxable as income (with 15% tax offset on taxable component) |
| 60 and over | Tax-free |
How to Process a Super Withdrawal
Step 1 — Confirm You Have Met a Condition of Release
You must have reached preservation age and met a condition of release (most commonly retirement) before your fund will process a withdrawal. See When Can I Access My Super? for the full list of conditions.
Step 2 — Decide on Lump Sum, Pension, or Both
Consider:
- Do you have immediate large expenses (mortgage payoff, home renovations)?
- What ongoing income do you need?
- How does the withdrawal affect your Age Pension eligibility?
- What is your tax position?
Step 3 — Contact Your Fund or Use Their Online Portal
Most funds allow withdrawal requests online or via a form. You will typically need to:
- Provide certified identity documents (if not already on file)
- Specify the amount and type (lump sum vs pension)
- Provide bank account details for lump sum payments
If setting up an account-based pension, you will also need to specify:
- The payment frequency (monthly, quarterly, annual)
- The payment amount (at or above the minimum)
- Your chosen investment option for the pension account
Step 4 — Tax File Number and Withholding
If you are under 60, your fund may withhold tax on the taxable component of your withdrawal. Ensure your TFN is registered with the fund to avoid the highest marginal withholding rate being applied by default.
After age 60, no withholding applies — withdrawals are tax-free.
Step 5 — Centrelink Notification
If you receive the Age Pension or other Centrelink payments, you must notify Centrelink of any change in your assets (including starting or changing a pension account). Failure to notify can result in overpayments that must be repaid.
Lump Sum vs Income Stream — Quick Decision Guide
| Situation | Generally Favours |
|---|---|
| Large immediate expenses (e.g. clear mortgage) | Lump sum for that amount |
| Want regular, predictable retirement income | Account-based pension |
| Close to Age Pension age — want to minimise assets | Spending lump sum can reduce assessable assets (timing matters) |
| Want investment earnings to remain tax-free | Account-based pension (earnings tax-exempt in pension phase) |
| Concerned about outliving savings | Retain more in pension; consider lifetime annuity for a portion |
Frequently Asked Questions
Can I withdraw my super and re-contribute it? In some circumstances, yes. This is known as a recontribution strategy — withdrawing super (taxable component) and re-contributing it as non-concessional contributions (tax-free component) to change the tax profile of your super. The benefit is mainly for estate planning — reducing the taxable component that your non-tax-dependant beneficiaries would otherwise pay tax on. Non-concessional contribution caps apply. Consider taking advice before attempting this strategy.
Can I withdraw super and continue working? Yes — after age 65 you can withdraw super and continue working. Between ages 60 and 65 you can access super if you have met the retirement condition of release (ceased an employment arrangement). You are not prohibited from returning to work after accessing super at age 60.
How long does a super withdrawal take? Most funds process lump sum withdrawals within 2–5 business days of receiving a completed, verified request. Setting up an account-based pension may take 5–10 business days. Delays can occur if additional identity verification is required or if the request is for a very large amount.
Can I withdraw my super if I move overseas? If you are an Australian citizen or permanent resident moving overseas, your super access rules remain the same — you must meet a condition of release. Temporary residents who leave permanently can claim a Departing Australia Superannuation Payment (DASP), subject to tax withholding.
For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.