You’ve worked hard for your super, so make sure you access your benefits in the most tax-effective way possible. Members aged under 60 years will pay tax on their withdrawals, but if you’re over 60 you generally will not pay any tax. But there are always exceptions.

The “tax free” component of your benefits is not taxed when you make a withdrawal, even if you’re under 60. This component is the part of your super balance made up of things like non-concessional contributions; whereas the “taxable” component is taxed. This component reflects things like compulsory superannuation guarantee contributions, salary-sacrifice contributions and personal contributions for which you claimed a tax deduction, as well as investment earnings.

If your accumulation account is 80% taxable and 20% tax-free at a particular point in time, any lump sum you withdraw at that time would also reflect this 80/20 split for tax purposes. Any pension you start at that time would have this 80/20 split locked in from the commencement day of the pension. The bigger your “taxable” component as a percentage of your account balance, the more tax you’ll pay when you withdraw benefits. The applicable tax rate for pensions is the taxable part of your pension payments taxed at your marginal rate, less a 15% tax offset.

For lump sums, the taxable part of a lump sum withdrawal is tax-free up to your “low rate cap” of $205,000 (for 2018–2019; set to increase to $210,000 for 2019–2020). This is a lifetime cap that you gradually utilise each time you withdraw a lump sum. Once you have fully utilised your cap, the remaining taxable part of any lump sum is then taxed at 17% (or your marginal rate, whichever is lower). Several exceptions apply to these rules.

Your adviser can also help you explore the possible tax benefit of starting a full account-based pension (ABP). Unlike a TRIS, an ABP requires that you’ve met a relevant condition of release such as retirement, but the advantage is that it attracts a partial or possibly a full exemption from income tax on investment earnings inside the fund. So, as you can see, the decision to access your benefits is best made with professional advice that takes into account a range of factors.

Talk to us today for expert advice tailored to your individual circumstances. We’ll help you navigate through the tax rules to get the most out of your retirement savings.