The amount of super you can withdraw tax-free in Australia primarily depends on your age and whether you are withdrawing it as a lump sum or an income stream.
Each year you can withdraw as much as you like through your account-based super income stream, unless you're receiving a transition to retirement income stream.
How much can I take from my pension tax-free?
Yes, retiring at 60 with $500,000 in super is possible for a modest lifestyle, especially if you own your home, plan to use the Age Pension, and manage expenses, though it might not cover a "comfortable" (more luxurious) retirement without other income or downsizing; it requires a solid plan, careful budgeting, and often working part-time. For a single person, $500k can support around $50,000-$52,000 per year, while a couple needs more, but you'll likely need to supplement with the Age Pension as your balance decreases.
Depending on your age, withdrawals and income payments from your super may be taxed. If you're over age 60, it's generally tax-free. If you're under age 60, the taxable portion of any income payments will generally be taxed at your marginal tax rate (plus Medicare levy).
To retire on $70,000 a year in Australia, a single person typically needs around $1.1 to $1.5 million, while a couple might need about $800,000 to $1.1 million, depending on retirement age (60 vs. 67), home ownership (assuming you own it outright), and the inclusion of the Age Pension. A good rule of thumb is needing roughly 15 to 20 times your desired annual income saved, with figures varying based on your lifestyle (modest vs. comfortable) and when you stop working.
Lump sum withdrawals
If you're aged 60 or over and withdraw a lump sum: You don't pay any tax when you withdraw from a taxed super fund. You may pay tax if you withdraw from an untaxed super fund, such as a public sector fund.
Around 80,000 Australians had over $2 million in superannuation as of 2019-2020 data, with estimates suggesting this number might be higher now due to asset growth, potentially affecting around 80,000 people with balances over $3 million by 2025. While most with high balances are older, some young individuals (under 30) also hold over $2 million in super.
The top ten financial mistakes most people make after retirement are:
If you save or invest your lump sum, you might have to pay more tax on the interest or investment growth than you would leaving it in the pension – growth within a pension is tax-free.
You can take it in slices over a number of tax years if the pension plan you have lets you, but you don't get a new 25% tax-free entitlement each year. If you have defined contribution pension, when you take your tax-free entitlement is up to you. You can take it all at once.
One benchmark is the “6% Rule”: if your annual pension payout equals 6% or more of the lump sum value, the annuity may be more competitive. If the rate is lower, investing the lump sum could offer greater potential.
It meant retirees could easily calculate how much they needed to save for retirement - by simply dividing the amount of money they would like to spend each year by the withdrawal rate. So if they wanted $50k each year from their portfolio at a 4% withdrawal rate, they could divide $50k by 4%, equalling $1.25 million.
On 1 July 2025, the general Transfer Balance Cap — the limit on how much you can move from your super into the retirement phase — will increase from $1.9 million to $2 million.
Currently the transfer balance cap is $2 million. After you retire any amounts over the cap need to be transferred into an accumulation account or withdrawn taken out as a lump sum. Earnings on any excess amount in your retirement account are taxed at 15%.
For a $70,000 annual retirement income in Australia, you generally need a super balance between roughly $1.1 million and $1.75 million for a single person, depending on when you retire, while couples might aim for around $690,000 to $820,000, often factoring in the Age Pension and home ownership. A common guideline is to aim for a balance that provides 70-85% of your pre-retirement income, but the exact figure depends heavily on your lifestyle, investment returns, and access to government support like the Age Pension.
For Australians aged 60-64, average superannuation balances are roughly $300,000 - $400,000 for men and $200,000 - $300,000 for women, though figures vary by source, with some showing men averaging over $400k and women over $300k, while others suggest around $313k for women and $395k for men, highlighting a persistent gender gap. These averages often fall short of the Association of Superannuation Funds of Australia (ASFA) targets for a comfortable retirement, which are closer to $595,000 for a single person by age 67.
In New South Wales, one is allowed to make use of their superannuation for assistance on a house deposit. If you do decide to use an existing super to buy your first house, don't worry we'll try to explain each step and help you as much as possible.
Yes, you can likely retire at 70 with $800,000, but it depends heavily on your annual spending, investment returns, and eligibility for government support like the Age Pension, potentially supporting a modest to comfortable lifestyle, though a very high-spending one might require more capital, according to wealthlab.com.au, Toro Wealth and Frontier Financial Group. Using the "4% Rule", $800,000 could provide around $32,000/year initially, but factoring in the Age Pension and lower expenses (like no mortgage/work costs) can make it stretch further, possibly supporting a single person's $44k-$50k/year needs.
Fewer people have $1 million in retirement savings than commonly thought, with around 4.6% to 4.7% of U.S. households having $1 million or more in retirement accounts, according to recent Federal Reserve data (2022), though this percentage rises for older age groups, with about 9% of those aged 55-64 reaching that milestone. However, the median retirement savings are much lower (around $88,000-$200,000), showing a large gap between averages and reality, with many retirees having significantly less, notes.
A $1 million retirement fund in Australia can last anywhere from under 20 years to over 30 years, heavily depending on your annual spending, investment returns, and whether you receive the Age Pension, with $40,000-$50,000/year lasting longer (30+ years) and higher spending (e.g., $60,000+/year) depleting it much faster (20-25 years), while combining with the Age Pension significantly extends its longevity.
How to avoid paying higher-rate tax
For most people, an income stream from superannuation will be tax-free from age 60. If someone has died and you need information on tax paid on their super death benefit, see tax and super.
The 3-year bring-forward rule allows Members in an SMSF to contribute more than the Non-Concessional Contribution (after-tax Contributions) cap of $120,000 during a 3-year financial period from 1 July 2024. From 1 July 2021 to 30 June 2024, the non-concessional contributions cap was $110,000.