Accessing Super After 60: What You Need To Know About Taking Lump Sums

For many Australians, turning 60 marks a major shift in how superannuation can be accessed. Once you have met a condition of release, you can withdraw lump sums from your super at any time, and for most people those withdrawals will be completely tax-free. This can be a valuable tool when managing debts, funding major expenses, assisting family members, or implementing strategies such as recontributions.

Before drawing on your retirement savings, it is important to understand the rules, the tax implications, and how withdrawals may influence your long-term retirement planning.

When You Can Access A Lump Sum

You have full access to your super when any of the following conditions are met:

• You have reached age 65, regardless of whether you continue to work.

• You are age 60 or older and have permanently retired.

• You have ceased an employment arrangement after turning 60, even if you intend to start work elsewhere.

  
  

There are also limited special circumstances under which early access is possible, although these rules apply only in exceptional cases.

How Much You Can Withdraw

Once you have satisfied a condition of release, you may withdraw any amount you choose, up to your entire account balance. There is no limit on the size or frequency of withdrawals. Many people take a large initial lump sum on retirement and then access further amounts as needed for significant purchases

How Lump Sum Withdrawals Are Taxed

For most Australians, superannuation is held in a taxed fund, which means:

• Lump sum withdrawals made after age 60 are entirely tax-free if you have met a condition of release.

  
  

However, some long-standing public sector schemes operate differently. This article will focus on taxed funds.

Withdrawing From An Account-Based Pension

You may choose whether an extra amount is treated as a lump sum or an additional pension payment. If you do not specify, most providers default to treating it as a pension payment.

If you request it be treated as a lump sum, it:

• Does not count towards your minimum pension requirement, and

• May require your fund to pay a pro-rata minimum pension amount before releasing the lump sum.

  
  

Strategic Planning Consideration

When you start a retirement phase pension, the amount you use to start that pension is recorded against something called your transfer balance cap. This cap limits how much of your super can sit in the retirement phase where investment earnings are tax-free.

If your cap is full, or nearly full, it becomes harder to move more money into the tax-free retirement phase in the future.

Here is where lump sum withdrawals can help.

If you take money out of your pension as a lump sum, the ATO reduces the amount recorded against your transfer balance cap. In other words, your “cap usage” goes down.

This can be very useful because:

• Reducing your cap usage creates more room under the cap,

• Which allows you to move more money into the tax-free retirement phase later (for example, after selling an investment property or after making a large non-concessional contribution).

  
  

If you take the same amount as an extra pension payment, your cap does not go down, and you do not create any future cap space.

In simple terms. taking withdrawals as lump sums can help free up space in your tax-free pension environment for future planning, while taking them as pension payments does not.

Why You Might Take A Lump Sum

Beyond covering immediate expenses, several strategic reasons may drive the decision to withdraw a lump sum:

• Optimising Age Pension outcomes through gifting or spouse contribution strategies.

• Implementing recontribution strategies to reduce tax payable by adult children who receive superannuation death benefits.

• Managing estate planning issues where a person with limited life expectancy wishes funds to be received tax-free by non-dependants.

  
  

Downsides To Consider

While lump sum withdrawals offer significant flexibility, they also come with some important risks:

• Money invested outside super is taxed at personal marginal rates, often higher than concessional super tax rates.

• For those under age 67, accumulation balances are exempt from Centrelink means testing, but once withdrawn they become assessable.

• Re-contributing funds later may not be possible due to contribution caps or age-based restrictions. After age 75, contributions are generally prohibited unless a downsizer contribution is available.

• Reducing your super balance may compromise your ability to fund your retirement over the long term, including future aged care needs.

  
  

The Bottom Line

Accessing your super after age 60 provides valuable flexibility, but it requires thoughtful planning. Lump sum withdrawals can offer tax-effective benefits and help with both short-term needs and long-term strategies. However, they also affect your retirement income, Centrelink position, income tax, and estate planning outcomes.

Before withdrawing funds from Super or even commencing a pension, we strongly suggest you consider your objectives, the tax implications, and any strategic opportunities available. We can usually address these issues in one consultation and then provide a detailed step-by-step guide for implementation. Feel free to contact us to arrange an appointment.