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Retirement income and tax

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The tax you pay on retirement income depends on your age and income stream.

Types of super income streams

You can receive income from super as:

How super income streams are taxed

Most people aged 60 and over do not pay tax on income from a super income stream.

If someone has died and you need information about tax on their super death benefit, see tax and super.

How your super is taxed

These rules apply to taxed super funds. Most super funds are taxed funds.

Different rules apply to untaxed super funds, including constitutionally protected funds and some public sector funds. Visit the ATO website for more information.

If you're age 60 or over

Your entire benefit is usually tax-free.

If you're age 55 to 59

Your income payment has 2 parts:

If you're age 55 or younger

You can usually only access your super as an income stream if you have a permanent incapacity. If you do, the same tax rules apply as they do for people aged 55 to 59.

If you access super for another reason, such as severe financial hardship, your income payment may have 2 parts:

Understanding taxable and tax-free components

The super benefit may include a taxable component, and a tax-free component.

The taxable component generally includes:

The tax-free component is generally made up of:

Find out more about how super withdrawals are taxed.

Use the income tax calculator to work out your marginal tax rate.

Tax on other types of super funds

Defined benefit super fund

Defined benefit pensions follow different tax rules to account-based pensions.

Before you can access your benefit, your fund will send you a statement. It will show how much of your benefit is taxable and how much is tax-free.

Untaxed super fund

Some super funds don't pay contributions tax on concessional contributions. These include constitutionally protected funds and some public sector schemes.

People often call these 'untaxed funds'.

If you're a member of an untaxed fund, you pay tax when you access your money or transfer it to another super fund. Contact your fund to find out more.

Self-managed super fund (SMSF)

If you're part of member of a self-managed super fund (SMSF), the trust deed sets the rules for how you can access your money. Find out more about paying benefits and any tax obligations for SMSFs on the ATO website. 

Tax on transition to retirement income streams

If you're aged 60 or over and still working, you can start a transition to retirement (TTR) income stream with part of your super. 

You can withdraw up to 10% of your balance each financial year as a regular income payment. You can't take it as a lump sum.

You pay tax on a TTR income stream in the same way as on other super income streams.

Investment earnings on TTR pensions are taxed at up to 15%, the same rate that applies to a super accumulation account.

Use the super and pension age calculator to find out your preservation age.

Tax on non-super income streams

You can buy an income stream product, such as an annuity, with money outside super.

Depending on the product, you may receive income for a set period or for the rest of your life.

Part of the income is taxable at your marginal tax rate. The rest is generally tax-free because it represents the money you used to buy the income stream.

Get help if you need it

Find out more about tax on super on the Australian Taxation Office (ATO) website.

Services Australia's Financial Information Service (FIS) offers free webinars on topics such as retirement income and pension options or make an appointment to see a FIS officer.

For help with tax matters, speak to a tax professional or financial adviser.

 

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