Lump Sum Withdrawal From Super Over 65

Making lump sum withdrawals from super over age 65 is easier than any other age and, in most cases, won’t incur any tax.

This article discusses the superannuation rules for an over 65 year old, including accessibility to super for people over 65 and the tax payable on a lump sum withdrawal from super when over 65.

For clarity and the purposes of this article, a lump sum withdrawal from super will be considered a withdrawal from the accumulation account of a superannuation fund.

It does not include a tax on pension income or commutations of a pension account. Those have been addressed in other articles.

Related Posts:

Let’s begin with the accessibility that a person over age 65 has to their superannuation and their ability to make a lump sum withdrawal from super over 65.
 

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Accessing Super At 65

 
In order to access superannuation, a person must meet a superannuation condition of release.

One such condition of release is attaining age 65. This achieves nil cashing restrictions. Nil cashing restrictions means that achieving this condition of release converts all superannuation savings to ‘unrestricted non-preserved‘ and there is no limit on the amount of balance that the member of the account can access in full or in part.

Put simply, upon reaching age 65, a person can access all of their superannuation balance with no exception. Some or all of the balance can be taken as a lump sum withdrawal, a pension income stream (such as an account based pension) or any combination of lump sums and pension income streams.

Withdrawing superannuation after 65 or commencing an income stream over age 65 is not compulsory. An individual may wish to leave all or some of their superannuation in the super accumulation account if they wish. Compulsory cashing of superannuation is a thing of the past.

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Tax on Lump Sum Withdrawals from Super Over Age 65

 
The superannuation tax rules for people over age 65 are the same as the rules for people over age 60.

The differentiator of tax on superannuation withdrawals, for both lump sum withdrawals and pension payments, is age 60 (i.e. people aged under 60 are taxed differently to people over age 60). There is no change in tax application of superannuation withdrawals at any other age above age 60.

The way that withdrawals from superannuation are assessed for tax purposes for individuals over age 65 is based on the tax components that make up the superannuation balance.

A superannuation balance will consist of a ‘Tax Free‘ component, a ‘Taxable (taxed)’ component and a ‘Taxable (untaxed)’ component. The majority of superannuation balances will only include a Tax Free and Taxable (taxed) component. Some will be 100% Tax Free or 100% Taxable. You can find out the components of your super account from the provider or SMSF administrator.

For example, a superannuation balance of $500,000 may be 70% Taxable (taxed) / 25% Tax Free / 5% Taxable (untaxed). In a super accumulation account, these proportions will change daily based on any new contributions to the account and earnings from investments within the account, including fluctuations in capital value.

All withdrawals must be made proportionately from each component.

Tax on a lump sum withdrawal from super over 65 will be as follows:

Tax Component Tax %
Tax Free 0%
Taxable (taxed) 0%
Taxable (untaxed) First $1.445M (lifetime indexed) 15%
Taxable (untaxed) Balance over $1.445M (lifetime indexed) 45%

Based on the example balance above, a $50,000 lump sum withdrawal from super over 65 would be taxed as follows:

Component Portion of Withdrawal % Portion of Withdrawal $ Tax on Withdrawal
Tax Free 25% $12500 $0
Taxable (taxed) 70% $35000 $0
Taxable (untaxed) 5% $2500 $375*
Total 100% $50000 $375

*assuming that the $2,500 (5% taxable (untaxed)) portion of the withdrawal did not cause the member to exceed the $1,445,000 lifetime indexed cap.

Can I Withdraw My Super at 65 and Keep Working?

You are able to withdraw some or all of your superannuation after age 65 and keep working. Read more about the ins and outs by clicking here.

Lump-Sum-Withdrawal-From-Super-Over-65
 

Transition to Retirement Pension Over 65

 
Once you reach age 65, you have met a full superannuation condition of release. Click here to understand how this affects a transition to retirement pension.
 

Superannuation Rules for Over 65

 
This article limited discussion to lump sum withdrawals over age 65. Click here for a more thorough understanding of the superannuation rules for over age 65.

Feel free to comment below if you have any questions on making a Lump Sum Withdrawal From Super Over 65.

Chris Strano

Chris Strano created SuperGuy to help the average punter navigate through the complex and ever-changing super rules. It has since become one of Australia's leading digital super resources. If you’re looking for more personalised advice, have a chat with one of our experts at www.superguy.com.au/need-advice

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16 Comments

  1. Cathy

    Hi Chris
    I’m just wondering if I can take a lump sum payment of $30,000 from my super. I am turning 60 in December and I have about $280,000 in super of which I put in a lump sum of $80,000 (a small inheritance about 5 years ago) or do I have to start a TRIP to get any extra money? Also my husband receives a small pension as he is 67 and retired and I work 3 days. If I did receive an extra amount fortnightly as in a TRIP would that be considered income by Centrelink and would he lose his pension?
    Hope someone can help as I’ve been trying to read articles and work it out but I’m just getting more confused
    Ta
    Cathy

    Reply
    • Chris Strano

      Hi Cathy
      1. To access your super as a lump sum you need to meet a full superannuation condition of release (permanent retirement with no intention of returning to work, ceasing an employment arrangement after 60 or reaching age 65 – see here)
      2. If you have not met a full condition of release, you should be able to commence a TRIP, allowing you to receive up to 10% of your super balance each year – see here.
      3. Superannuation accumulation savings are not assessed by centrelink while they remain preserved. Meeting a condition of release/ commencing a pension (including TRIP) will mean your superannuation becomes assessable under the Centrelink assets test and income test (deeming) and may affect Centrelink entitlements being received by you or your husband. You should be able to contact Centrelink (or a financial planner) and ask them how it would affect his entitlements.

      Reply
  2. Anthony D

    Great valuable content Chris, not just with this post but a lot of the content I’ve found on your site. I’m happy I stumbled upon it. I’ll surely use it as a Super reference from now on. Cheers.

    Reply
    • Chris Strano

      Thanks Anthony. I appreciate your comments

      Reply
  3. Nicole

    Hi Chris,
    I am 46 and have $140k in super. My husband is 67 and has around $12k in super. We are both working full-time and SG contributions are made by our respective employers.
    If we establish a SMSF and roll over both super balances into it, can my husband withdraw the entire balance of $152k because he is over 65?
    Would doing this draw the attention/wrath of the ATO?
    I appreciate that this is not a good investment strategy, we are considering this to pay out debt.

    Reply
    • Chris Strano

      As your husband is over age 65, he has met a superannuation condition of release and should have full unrestricted access to his superannuation savings. However, this does not allow him to access your superannuation savings – even if a SMSF is established. A SMSF may ‘combine’ your balances for investment purposes, but it does not combine your balances for any other purpose. SMSF records will dictate how much is your balance and how much is your husbands. So, no, he cannot withdraw the entire balance.

      Reply
  4. Kaye Edmonds

    Hi Chris,
    I will be 65 in June 2020
    I plan to withdraw my Hesta Super as a lump sum to pay off our Mortgage
    I plan to keep working maybe just 2 days pr week Nursing.
    How much Tax can I expect to pay on $200,000 or $220000
    Cheers
    Kaye

    Reply
    • Chris Strano

      Hi Kaye,
      The taxation rules on superannuation withdrawals may be different in 2020 than they are today. However, if they were the same: All withdrawals from super for people over age 60 are received completely tax free, with the exception of any ‘taxable (untaxed) component‘. The taxable (untaxed) component of your balance will incur tax of 15% up to $1.48 million and 45% for anything above (untaxed component only). It is very possible that your super balance does not include a taxable (untaxed) component and therefore your withdrawal will be completely tax free. You should contact your superannuation provider and ask if your balance includes a taxable (untaxed) component.

      Reply
  5. Bob

    i need to take out $140.000 out of my super to put towards a home

    in a over 55 retirement village . i have just turned 65 and still

    have 6 months to go till i get my pension . will drawing this

    money out effect my pension when the time comes to get it

    thanks for your time

    Reply
    • Chris Strano

      Hi Bob,
      Any amount within a superannuation accumulation account is not assessable until Age Pension age.
      Withdrawing money out of superannuation and putting it in a personal bank account will make it assessable under the Centrelink Income Test and Assets Test.
      If funds are used to immediately purchase a home to be used as a principal place of residence it can avoid assessment from Centrelink, due to a home being exempt from Centrelink assessment.
      In any case, if a is not spent within 14 days of receiving it, you must notify Centrelink.
      Read more here https://www.humanservices.gov.au/individuals/enablers/lump-sums-while-income-support/28961
      If you are ever unsure of what to disclose to Centrelink, it is often best to let them know what you are doing as soon as possible and they can advise of any impact it may have.
      Related Posts:
      Lump Sum Withdrawals and Centrelink

      Reply
  6. Ian

    hi Chris,
    we are moving from Perth to the ACT, and selling our house here.
    I have about 500000 divided into two super income stream accounts, I am 65 and just retired , can I take 200,000 out to help purchase a house of similar size in the ACT

    Regards

    Reply
    • Chris Strano

      Hi Ian,
      Reaching age 65 is considered a full superannuation condition of release and provides unrestricted access to superannuation/pension savings. That is, there is no maximum limit on what can be withdrawn from super. Withdrawals from super are generally tax free (unless the balance includes a taxable (untaxed) component – ask your super provider if you balance includes this).
      Withdrawals can be taken as pension payments or lump sum withdrawals.
      Potential capital gains tax (CGT) from selling investments within super should be considered, though this should not be an issue if total balances are in pension phase.
      Also, any transaction costs from selling investments within super should be considered.

      Reply
  7. Gordon Smith

    Hi, I have a Pension Plan via B.T. which pays me a monthly amount – I always take the minimum amount allowed. I am 81 years old. I recently found it necessary to withdraw the amount of $3000 from the fund paid into my bank account which obviously reduced the balance of the account. I report the annual balance to Centrelink on the 30th June each year and the anticipated monthly payments for the next year. My wife and myself do receive a fortnightly part aged pension payment from Centrelink which is based on our income rather than assets. The special lump sum withdrawal was made on the 28th July this year. In reading articles concerning lump sum withdrawals from Super I get the impression that this is regarded as affecting our assets rather than being regarded as income. Could uou advise if it is necessary to advise Centrelink of this lump sum withdrawal and if the lump sum will have an affect on our fortnightly aged pension payments? Thanks Gordon

    Reply
    • Chris Strano

      Hi Gordon,
      If I’m not mistaken, I believe Centrelink can get a automated update of your balance from BT to ensure that they are always up to date with your balance and that over or under payment doesn’t occur.
      If you have a grandfathered account based pension (i.e. you started the BT pension prior to 1 Jan 2015 and have been in receipt of continuous Centrelink payments since that date), then the withdrawal may temporarily affect your entitlements. The way in which it affects your payments will depend on whether the withdrawal was made as a commutation or a one-off increased pension payment.
      If you do not have a grandfathered pension (i.e. you commenced your BT pension after 1 Jan 2015 and/or have not been in continuous receipt of Age Pension payments since 1 Jan 2015), then the wothdrawal will not affect your Age Pension payments.
      You should consider requesting a Centrelink Schedule relating to your pension from BT, whcih can then be forwarded onto Centrelink. As a rule of thumb, it is always best to update Centrelink more often than not.
      Hope this helps,
      Chris
      Related Posts
      What Is A Centrelink Schedule?
      What is a Grandfathered Pension?
      Lump sum Withdrawals and Centrelink

      Reply
  8. Connie

    Hi Chris

    I am over 70 and would like to withdraw the whole amount of my Superannuation Fund and deposit the money into my bank account. I have checked the interest rates available with my bank and they can offer me a better deal than I have been getting with my Super Fund. As I am over 70, can I do that without complications?

    I look forward to your advice in this matter.

    Regards

    Connie

    Reply
    • Chris Strano

      Hi Connie,
      Generally, withdrawals from super from people over age 70 are received tax-free. However, there are a number of implications that need to be considered, including but not limited to:
      1. Potential tax on earnings going-forward from this amount now that it will be invested in your own name;
      2. Centrelink assessment of the income, which could reduce any Age Pension entitlements you are receiving or increase potential future aged care costs;
      3. How the withdrawal from super may affect your estate plan
      4. Any insurances within super that may be lost as a result of closing the account;
      5. The loss of asset protection that super can provide

      It’s possible that most of the above won’t apply to you, but I do not know the particulars of your situation. It is best for you to consider seeking personal advice from a financial planner, or at the very least talk about your options with your super fund or your accountant.

      Reply

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