Lump sum payments from superannuation for people over age 60 are generally favourably taxed.
However, you first need to make sure that you are able to access your super before making a lump sum withdrawal from super over age 60, because being over age 60 does not, in itself, give you the ability to make a lump sum withdrawal from super. Click here to read the rules.
There are some things to be aware of before making a lump sum withdrawal from super to avoid being slugged with an unexpected tax bill.
This article addresses how you can access your super over age 60, as well as the tax on super lump sum payments, including the treatment of the taxable and tax-free components of your superannuation balance and when you can access your super tax free.
Sound confusing?
Don’t worry, it’s simple.
Let me explain.
Accessing Super Lump Sum Payments Over 60
Accessing superannuation in the form of a superannuation transition to retirement pension income stream is no problem if you are over age 60. But, what about lump sums? Can you access your super as a lump sum over age 60?
In order to access your superannuation as a lump sum you need to have met a superannuation condition of release.
A superannuation condition of release for people aged between 60 and 65 requires you to either:
1. Have ceased an employment arrangement after reaching age 60 (even if you were to commence a new employment arrangement immediately after); OR
2. Have ceased an employment arrangement after reaching your superannuation preservation age, with no intention of returning to full-time or part-time work
Both of the above satisfy the condition of release definitions of ‘retirement‘; and achieving ‘retirement’ gives you full and unlimited access to the superannuation that you had accumulate up until that point.
Therefore, upon achieving retirement, as defined for superannuation purposes, you can commence an income stream with your super savings, take a lump sum withdrawal from super or take a combination of a lump sum payment and pension income stream.
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Tax On Super Lump Sum Payments over 60
There are two main types of tax components that every superannuation account consists of. These include the ‘Taxable’ component and the ‘Tax-Free’ component. You can read more about the ‘Taxable’ component HERE or the ”Tax Free’ component HERE.
The Taxable component is further divided into the Taxable (taxed) and the Taxable (untaxed).
All lump sum withdrawals from super over age 60 must be made proportionately from each tax component.
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The tax on the Tax-Free component portion of the lump sum withdrawal is received completely tax free when over age 60.
The tax on the Taxable (taxed) component portion of the lump sum withdrawal is received completely tax free when over age 60.
The tax on the Taxable (untaxed) component portion of the lump sum withdrawal is taxed at 15% for the first $1.415M* (lifetime indexed amount) and 45% for any amount in excess, when over age 60.
*From 1 July 2017, this figure increases to $1.445M ($1,445,000).
The table below shows this for people aged 60 and over:
| Tax Component | Tax Rate |
|---|---|
| Tax-Free | 0% |
| Taxable (taxed) | 0% |
| Taxable (untaxed) up to $1.415M Lifetime Indexed | 15% |
| Taxable (untaxed) over $1.415M Lifetime Indexed | 45% |
Hopefully this article has helped you to find the information you were looking for in relation to super lump sum payments for people aged 60 or over.
If you are receiving social security entitlements, you should understand the impact of making lump sum withdrawals from super and how it may affect Centrelink payments or benefits.
