For most Australians, all super withdrawals become tax-free at age 60 — whether taken as a lump sum or pension income. This is one of the most significant tax benefits in the Australian superannuation system, and it applies to virtually everyone with a private sector industry fund, retail fund, or SMSF.
Key Takeaways
- All super withdrawals from a taxed fund are completely tax-free at age 60 and over
- This applies to both lump sum withdrawals and account-based pension income payments
- Before age 60 (but at or above preservation age), the taxable component is taxed — though at concessional rates
- Members of untaxed super funds (most government public sector schemes) may still pay tax after 60
- The 0% tax on withdrawals is separate from the 0% tax on earnings in pension phase — both apply after 60
What Changes at Age 60?
The tax treatment of super withdrawals depends on whether you have reached age 60 and the type of fund you are drawing from.
For members of a taxed super fund (which includes all industry funds such as AustralianSuper, Hostplus, Aware Super, REST, and Cbus; all retail funds; and almost all SMSFs):
- Lump sum withdrawals at 60+: Completely tax-free, regardless of the amount
- Account-based pension payments at 60+: Completely tax-free, not included in assessable income for income tax purposes
This applies to both components of your super balance:
- The tax-free component (from after-tax contributions): tax-free at any age
- The taxable component (from employer/salary sacrifice contributions and investment earnings): becomes tax-free at 60
Why Is Super Tax-Free After 60?
Super contributions and earnings have already been taxed inside the fund during the accumulation phase (at 15%). The tax-free treatment at withdrawal prevents these savings from being taxed again when they come out.
The design of the super tax system means:
- Money going in is taxed at a concessional 15% (instead of your marginal rate)
- Money inside the fund earns at 15% tax in accumulation (or 0% in pension phase)
- Money coming out at 60+ is taxed at 0%
The 0% withdrawal rate is the government’s reward for locking money away in super until retirement age. It’s also the reason superannuation is one of the most tax-efficient investment vehicles available to Australians.
Before 60 — How Withdrawals Are Taxed
Preservation Age to 59
Once you have met a condition of release (typically retirement or reaching preservation age), you can access super before 60. However, different tax rates apply:
Tax-free component: Always 0% — no tax, regardless of age.
Taxable component (taxed element):
- First $235,000 (the low-rate cap, FY2025–26): 0% tax
- Above $235,000: 15% + 2% Medicare levy = 17%
The low-rate cap is a lifetime amount. Once you draw $235,000 in taxable component withdrawals before age 60 (across multiple withdrawals, over your lifetime), further withdrawals are taxed at 17% until you turn 60.
From a practical standpoint: If most of your super is in the taxable component and your balance is under $235,000, a pre-60 withdrawal is effectively tax-free (0% on the taxable component up to the low-rate cap). Once the cap is used, the tax cost is 17%.
Tax on pension payments before 60: Rather than lump sum tax treatment, pension payments before 60 are included in assessable income but receive a 15% tax offset on the taxable component. This often results in low or no tax for those with modest pension income and limited other income.
Under Preservation Age
Super is generally inaccessible before preservation age except in very limited circumstances (financial hardship, terminal illness, etc.). If accessed early:
- Tax-free component: 0%
- Taxable component: 22% (20% + 2% Medicare levy) — this rate applies regardless of amount
This high rate reflects the fact that super was not intended to be accessed this early.
The Super Components — Tax-Free vs Taxable
The tax treatment differs by component, and this proportioning is fixed:
- You cannot choose to withdraw only from the tax-free component
- Every withdrawal (lump sum or pension) is drawn proportionally from both components, based on the current ratio in your account
Example: If your super balance is $400,000 — $100,000 tax-free and $300,000 taxable — then 25% of every withdrawal comes from the tax-free component and 75% from the taxable component. A $50,000 withdrawal would consist of $12,500 tax-free + $37,500 taxable.
Edge Cases — When Tax Applies After 60
Untaxed Funds (Government Defined Benefit Schemes)
Some older government sector super schemes (such as some public sector defined benefit funds) have an untaxed element — meaning contributions tax was never paid at 15% inside the fund. These are uncommon in the private sector.
For withdrawals from an untaxed fund at age 60+:
- The taxable component (untaxed element) is taxed at your marginal rate, with a 10% tax offset
- The untaxed plan cap for FY2025–26 is $1.65M — above this, the top marginal rate of 47% applies without offset
If you are a government employee with a defined benefit entitlement, check with your fund whether your benefit has an untaxed element.
Death Benefits to Non-Tax-Dependants
When super passes to a non-tax-dependant on death (e.g. adult children who are not financially dependent on the deceased), the taxable component is taxed at 17% (15% + 2% Medicare levy) — even if the member was over 60. This is one reason some retirees undertake a recontribution strategy — withdrawing from super and recontributing as non-concessional contributions to convert taxable component to tax-free component, reducing the estate tax burden.
Division 296 Tax (from 1 July 2025)
For individuals with total super balances above $3 million, an additional 15% tax applies to notional earnings on the balance above $3M. This does not affect withdrawal tax rates (which remain 0% at 60+), but does affect the fund’s earnings during accumulation. See Division 296 Tax.
Frequently Asked Questions
I have an industry fund — are my withdrawals after 60 definitely tax-free? Yes. All major industry funds (AustralianSuper, Hostplus, Aware Super, REST, Cbus, UniSuper for most members, etc.) are taxed funds. Withdrawals after 60 from these funds are completely tax-free.
Do I need to declare super income in my tax return after 60? If you are 60 and over and receiving account-based pension payments from a taxed fund, those payments are not included in your assessable income and generally do not need to be declared in your tax return. However, you may still need to lodge a return if you have other income sources.
I turned 60 mid-year — are all my withdrawals tax-free? Withdrawals made on or after your 60th birthday are tax-free. Withdrawals made before your 60th birthday in the same financial year are subject to the pre-60 tax rules (low-rate cap applies to taxable component). If you are close to 60, it may be worth waiting until after your birthday to make a withdrawal.
Is there any advantage to drawing down super before 60? Occasionally — for example, if you have a large tax-free component (from after-tax contributions), you can draw from super tax-free at any age. Some people also draw modest amounts before 60 to utilise the $235,000 low-rate cap on the taxable component before age 60, particularly if they won’t need the money until later. However, for most people, waiting until 60 for full tax-free access is the simplest approach.
See the ATO’s super withdrawal tax guidance for official rules. For advice tailored to your situation, speak with a licensed financial adviser through MoneySmart.