Questions & Answers - Access Super Benefit

Generally, you must reach preservation age before you can access your super. Use the following table to work out your preservation age.

If you are aged over 65 or aged between Preservation Age and 64 and "Retired" you can access your Super Benefit either as a Simple Account Based Pension (which has tax concessions) or as a Lump Sum. If you are aged between Preservation Age and 64 and NOT Retired you can access your Super Benefit as a TRIS only.

The definition of "Retirement" varies depending on when you cease work.

If you cease employment after age 60, "Retirement" means you cease your employment. In this case the intention to return to the workforce is irrelevant. This means that you can essentially return to work soon after ceasing your employment after age 60, but you will still deemed to be retired and able to commence a Simple Account Based Pension. The definition of retirement in this case is less stringent than for those under 60.

If you cease employment between Preservation Age and 59, "Retirement" means that at the time you ceased employment you never intended to work again either on a full-time or part-time basis (defined as more than 10 hours per week). This declaration must be made to your SMSF and is made at the time you cease employment. It is noted that whilst a person who ceases employment when aged between Preservation Age and 59 never intends to work again, they may ultimately do so. This will not alter the person's status as being retired enabling them to have access to their Super Benefit notwithstanding they have returned to work.

As soon as you retire from the workforce and met the definition of “Retirement”, please complete the “Retirement” Application here.

A Pension (either an SABP or a TRIS) means that periodically (e.g. each month or other period you nominate) cash is transferred from your SMSF Bank Account to your Personal Bank Account to fund your living expenses. For more information on Pensions, please click here.

If you do decide to commence a Pension from your SMSF, then you must take a Minimum Pension amount each year. For more information on the Minimum Pension amount, please click here.

If you do decide to commence a Pension from your SMSF, there is no Maximum Pension Amount if you are aged over 65 or aged between Preservation Age and 64 and "Retired". If you are aged between Preservation Age and 64 and are NOT "Retired" you can withdraw a Maximum of 10% of your Pension balance.

Nil. The Pension Income that is paid to you by the SMSF each year after you commence a Pension (SABP or TRIS) is tax free after you have turned 60.

This depends on the amount of the Pension. Your Super Benefit is made up of two components, namely a Tax Free Component and a Taxable Component. The Tax Free Component typically comes from after tax personal Non Concessional Contributions made by you over time. The Taxable Component typically comes from Concessional Contributions made by you over time which include Employer Contributions and Salary Sacrifice Contributions. Any Pension Withdrawals must be paid in the same proportion as the Tax Free and Taxable Components of the Member's interest in the SMSF. This requirement is known as the "Proportioning Rule".

Under the "Proportioning Rule" and where the Member is aged between Preservation Age and 59, the "Tax Free" Component of the Pension withdrawal is tax free. The "Taxable" Component of the Pension withdrawal is taxed at the Member's marginal tax rate less a 15% "Pension Rebate".

Example:

As an example assume you have a Super Benefit of $500,000 made up as follows:

"Tax Free" Component: $400,000
"Taxable" Component: $100,000
Total Super Benefit: $500,000

In this example your "Tax Free" percentage is 80% ($400,000/$500,000) and your "Taxable" percentage is 20% ($100,000/$500,000). Under the "Proportioning Rule" this means that 80% of your Pension withdrawals will be tax free and 20% will be taxable where the Pension withdrawals are made between Preservation Age and 59.

Assume you draw the minimum pension of 4% per annum on your $500,000 Super Benefit (i.e. $20,000). The Pension withdrawn of $20,000 will be 80% tax free (i.e. $16,000) and 20% taxable (i.e. $4,000). In addition you will be allowed a 15% "Pension Rebate" on the taxable portion of the Pension withdrawn, further reducing your tax liability.

In the above example assuming you are on the 34.50% personal marginal tax rate, you would be assessable on the $4,000 taxable portion of the Pension withdrawn at 34.50%, resulting in $1,380 in tax. Given you also receive a 15% "Pension Rebate" on the taxable portion of the Pension withdrawn of $4,000 (i.e. 15% of $4,000 or $600), the tax liability is further reduced to only $780. This means you pay tax of $780 on a $20,000 Pension withdrawal in the above example.

The process to calculate the tax on Pension Withdrawals paid to a Member who is aged between Preservation Age and 59 is as follows:

Step 1: Determine the Tax Free Component of your Super Benefit 
Step 2: Determine the Taxable Component of your Super Benefit 
Step 3: The Total of the Taxable and Tax Free Components make up your Total Super Benefit 
Step 4: Calculate the Tax Free Component percentage equal to Step 1 divided by Step 3 
Step 5: Calculate the Taxable Component percentage equal to Step 2 divided by Step 3 
Step 6: Multiply the Pension Payment by the Tax Free percentage at Step 4. The result is Tax Free.
Step 7: Multiply the Pension Payment by the Taxable percentage at Step 5. The result is taxed at the Member's tax rate less a 15% Pension Rebate.

The alternative way to access your Super Benefit is as a Lump Sum Withdrawal. A Lump Sum Withdrawal is an amount accessed from your SMSF that is not a Pension Payment. You can make Lump Sum withdrawals whenever you like from your SMSF once you turn 65 or alternatively when you are aged between Preservation Age and 64 and are "Retired". You cannot make Lump Sum Withdrawals when you are under 65 if you are NOT Retired.

Nil. Lump Sum Withdrawals accessed after the age of 60 are tax free.

This depends on the amount of the Lump Sum Withdrawal made. Your Super Benefit is made up of two components, namely a Tax Free Component and a Taxable Component. The Tax Free Component typically comes from after tax personal Non Concessional Contributions made by you over time. The Taxable Component typically comes from Concessional Contributions made by you over time which include Employer Contributions and Salary Sacrifice Contributions. Any Lump Sum Withdrawals must be paid in the same proportion as the Tax Free and Taxable Components of the Member's interest in the SMSF. This requirement is known as the "Proportioning Rule".

Under the "Proportioning Rule" and where the Member is aged between Preservation Age and 59, the "Tax Free" Component of the Lump Sum withdrawal is tax free. The "Taxable" Component of the Lump Sum withdrawal is taxed as follows:

The amount up to the low rate cap amount is tax free.
The amount above the low rate cap amount is taxed at 17%

Low rate cap amount

The application of the low rate threshold for super Lump Sum payments is capped. The low rate cap amount is reduced by any amount previously applied to the low rate threshold.

Example:

As an example assume you have a Super Benefit of $500,000 made up as follows:

• "Tax Free" Component: $400,000
• "Taxable" Component: $100,000
• Total Super Benefit: $500,000

In this example your "Tax Free" percentage is 80% ($400,000/$500,000) and your "Taxable" percentage is 20% ($100,000/$500,000). Under the "Proportioning Rule" this means that 80% of your Lump Sum withdrawals will be tax free and 20% will be taxable where the Lump Sum withdrawals are made between Preservation Age and 59.

Assume you decide to access $100,000 as a Lump Sum withdrawal in the 2023-2024 Financial Year and are eligible to do so. In this case 80% of the withdrawal amount will be tax free and the balance will be taxable, namely 20% of the $100,000 or $20,000. The $20,000 assessable amount is then taxed as follows:

• The First $235,000 of your Taxable Component is tax free.
• The Taxable Component above $235,000 is taxed at 17%.

In the above example as the taxable portion of the Lump Sum of $20,000 is less than $235,000, it is tax free.

The process to calculate the tax on Lump Sum Withdrawals paid to a Member who is aged between Preservation Age and 59 is as follows:

Step 1: Determine the Tax Free Component of your Super Benefit
Step 2: Determine the Taxable Component of your Super Benefit 
Step 3: The Total of the Taxable and Tax Free Components make up your Total Super Benefit 
Step 4: Calculate the Tax Free Component percentage equal to Step 1 divided by Step 3 
Step 5: Calculate the Taxable Component percentage equal to Step 2 divided by Step 3 
Step 6: Multiply the Lump Sum Withdrawal by the Tax Free percentage at Step 4. The result is Tax Free.
Step 7: Multiply the Lump Sum Withdrawal by the Taxable percentage at Step 5. The result is taxed at:

Low rate cap amount

The application of the low rate threshold for super Lump Sum payments is capped. The low rate cap amount is reduced by any amount previously applied to the low rate threshold.

If you have NOT commenced a Pension from your SMSF all withdrawals made from your SMSF will be treated as a Lump Sum withdrawal when aged between preservation age and 59 and “Retired”. Alternatively, if you have commenced a Pension from your SMSF, you have the choice to make either Pension or Lump Sum withdrawal in addition to the annual minimum pension amount, which must be made as Pension withdrawals.

We caution that Pension withdrawals and Lump Sum withdrawals are two different withdrawal types and different rules apply. For more information on the difference between Pension withdrawals and Lump Sum withdrawals, please click here.

No, you are not required to access your Super Benefit as either a Pension or a Lump Sum withdrawal regardless of your age and retirement status. If you have commenced an SABP or a TRIS in your SMSF, you must meet the annual Pension Minimum withdrawal requirement each Financial Year to evidence the Pension establishment.

Usually No. If you are under Preservation Age you cannot access your Super Benefit unless you have an Unpreserved Super Benefit. In most cases most Australians who are under Preservation Age will not have any Unpreserved Super Benefit and will have to wait until Preservation Age, in order to begin to access their Super Benefit. It is however noted that it may be possible to access some or all of your Super Benefit when you are under Preservation Age under various other provisions as detailed below.

For more information on the above provisions, please click here.