Is superannuation tax-free after 60? Here's what you need to know

Superannuation is the backbone of retirement planning for most Australians. Understanding the tax side of accessing your super helps you make smarter decisions and get more out of what you've spent a lifetime building.

Tax-free superannuation after 60

Once you turn 60, accessing your super becomes significantly more tax-friendly. If your super comes from a taxed source (which covers the vast majority of Australians), both lump sum withdrawals and regular income stream payments are generally tax-free.

If your super comes from an untaxed source, which is more common in certain public sector funds, different tax rules apply. It's worth checking which category your fund falls into if you're unsure.

Transition to retirement (TTR) income streams

If you've reached your preservation age of 60 but aren't ready to fully retire, a Transition to Retirement Income Stream (TRIS) lets you start drawing on your super while you keep working.

With a TRIS, you can draw down between 4% and 10% of your super balance each year. The tax treatment depends on your age:

• Under 60. The taxable portion of your TRIS payments is taxed at your marginal rate, with a 15% tax offset applied.
• 60 and over. TRIS payments are generally tax-free.

One thing to keep in mind: investment earnings within a TRIS are taxed at 15% unless the TRIS has moved into the retirement phase.

Defined benefit and untaxed super funds

Members of defined benefit or untaxed super funds can face a different tax picture, even after 60. Lump sum withdrawals from these funds may be partially taxable, and some components of income streams may still attract tax, though a 10% tax offset can apply.

If you're in one of these funds, speaking directly with your fund or a financial adviser is the clearest path to understanding exactly where you stand.

Getting the right advice

Super tax rules have enough moving parts that personalised advice genuinely makes a difference. A few good options:

• Financial advisers can help you build a strategy tailored to your retirement income goals.
• Tax professionals can clarify the implications for your specific situation and help you stay on the right side of your obligations.
• The Financial Information Service (FIS), offered by Services Australia, provides free seminars and information on financial matters, including superannuation. A solid starting point if you want to get across the basics before going further.

The bottom line

Super does become more tax-effective after 60, but your individual circumstances matter. Taking the time to understand the nuances and getting advice where you need it means you're far better placed to make the most of what you've saved.

Sources:

• Australian Taxation Office, accessing your super to retire
• Australian Taxation Office, transition to retirement income streams
• Australian Taxation Office, tax treatment of super income streams
• Moneysmart, transition to retirement
• Moneysmart, retirement income and tax
• Australian Taxation Office, defined benefit income caps and offsets