A lump sum superannuation withdrawal is a one-off payment from your super balance. Once you have met a condition of release — most commonly reaching preservation age (60) and retiring — you can take some or all of your super as a lump sum, an income stream, or a mix of both.
When Can You Take a Lump Sum?
You can take a lump sum super withdrawal once you have:
- Reached preservation age (60 for those born after 30 June 1964) and met a condition of release (e.g. retired, ceased an employment arrangement)
- Reached age 65 — at which point you can access your super in any form, regardless of employment status
- Met an alternative condition of release — such as permanent incapacity, terminal medical condition, or severe financial hardship
A Transition to Retirement (TTR) pension does not permit lump sum withdrawals — TTR is limited to income stream payments only.
Tax on Lump Sum Withdrawals
The tax you pay on a lump sum withdrawal depends on your age and the component of your super being withdrawn.
The Two Super Components
| Component | What It Is |
|---|---|
| Tax-free component | After-tax (non-concessional) contributions, government co-contributions |
| Taxable component | Employer SG, salary sacrifice, personal deductible contributions, and all fund earnings |
Almost all Australians have some taxable component — it’s the default for most contribution types.
Tax Rate by Age
| Your Age | Tax-Free Component | Taxable Component |
|---|---|---|
| Under preservation age | Nil | 20% + 2% Medicare levy |
| Preservation age to 59 | Nil | 0% up to $235,000 (low-rate cap*); 15% + Medicare levy above cap |
| 60 and over | Nil | Nil |
After age 60, all lump sum super withdrawals are completely tax-free.
The low-rate cap for FY2025–26 is $235,000. This is a lifetime cap — once you’ve used it up across all lump sum withdrawals before age 60, all further taxable component withdrawals are taxed at 15% + Medicare levy. The cap is indexed annually and applies per person, not per fund. Source: ATO.
Practical Examples
Example 1 — Age 62, Retired, Taking a Full Lump Sum
Maria is 62, has retired, and her super balance is $380,000 (80% taxable component, 20% tax-free component).
- Tax-free component: $76,000 → $0 tax
- Taxable component: $304,000 → $0 tax (she is over 60)
Total tax: $0.
Example 2 — Age 57, Met Retirement Condition, Taking a Partial Lump Sum
Tom is 57, has met the retirement condition, and wants to take $100,000 as a lump sum. His super is 90% taxable component.
- Tax-free component: $10,000 → $0 tax
- Taxable component: $90,000 → 0% tax (within the $235,000 low-rate cap)
Total tax: $0 (assuming he hasn’t used any of his low-rate cap previously).
Lump Sum vs Account-Based Pension
| Lump Sum | Account-Based Pension | |
|---|---|---|
| Tax on withdrawal | Tax-free after 60; low-rate cap applies pre-60 | Payments tax-free after 60 |
| Tax on investment returns | Returns outside super taxed at marginal rate | Returns in pension phase: tax-free |
| Flexibility | Take it all at once | Regular income; can also make additional lump sum withdrawals |
| Age Pension means test | Lump sum is cash — counts as an asset | Account balance counts; deemed income test applies |
| Estate planning | Lump sum passes per your will | Super pension may have different rules; death benefit nomination applies |
For most retirees, an account-based pension is more tax-efficient than a full lump sum — because investment earnings in pension phase are completely tax-free, and regular drawdowns allow the balance to compound longer. A common approach is to take a partial lump sum (e.g. to pay off debt) and convert the rest to a pension.
Recontribution Strategy — Using Lump Sums for Estate Planning
Some retirees aged 60+ use a recontribution strategy: withdraw super as a lump sum (taxable component, tax-free after 60), then recontribute the same amount as after-tax (non-concessional) contributions. The effect is to shift the balance from the taxable component to the tax-free component.
Why does this matter? Non-tax-dependant beneficiaries (e.g. adult children) pay up to 15% tax (+ Medicare levy) on the taxable component of a super death benefit. The tax-free component passes to them free of tax. By converting taxable to tax-free via recontributions, an estate planning benefit can be achieved.
This strategy requires careful planning — non-concessional contribution caps apply, bring-forward rules may be used, and the benefit depends on the structure of your estate. See Recontribution Strategy Explained for full detail.
How to Make a Lump Sum Withdrawal
- Confirm you meet a condition of release (see When Can I Access My Super?)
- Log in to your fund’s online portal or call them
- Complete a withdrawal request form — specify the amount and your bank account
- Verify your identity — your fund may require ID if not already on file
- Confirm your TFN is registered with the fund — failure to provide TFN means withholding at the highest marginal rate
Processing time is typically 2–5 business days for existing members with ID on file.
Frequently Asked Questions
Can I withdraw my entire super as a lump sum at retirement? Yes — there is no restriction on taking your entire super balance as a single lump sum at retirement (after meeting a condition of release). However, money taken out of super loses the tax-advantaged environment — investment returns on the lump sum outside super are then taxed at your marginal rate.
Is there a maximum lump sum I can take? There is no annual maximum on lump sums taken in retirement phase. The Transfer Balance Cap ($2.0M in FY2025–26) limits how much you can transfer into a pension account, but lump sum withdrawals from accumulation have no cap.
Does a lump sum affect the Age Pension? Potentially yes. If you spend the lump sum on assessable assets (e.g. a car, investments), those count in the assets test. However, if you spend it on your home (a non-assessable asset), it reduces assessable assets. This is an area where timing and planning matter significantly.
Can I take a partial lump sum and also start a pension? Yes — this is very common. You can take part of your balance as a lump sum (e.g. to clear a mortgage) and roll the remainder into an account-based pension.
For advice tailored to your situation, speak with a licensed financial adviser. You can find one through the ASIC financial advisers register or MoneySmart.