Tax on Super Withdrawals
After 60, withdrawals from a taxed super fund are tax-free — lump sum or pension. Here's what applies before 60, and how the two super components work.
From age 60, withdrawals from a taxed fund — nearly every ordinary Australian super fund — are completely tax-free. Not reduced, not deferred: nothing.
But 'tax-free after 60' hides two useful stories: what happens if you need the money earlier, and why your super statement mentions mysterious 'components'. Here's the plain-language version of both.
After 60: the golden rule
Once you've reached 60 and met a condition of release — jargon for an official unlocking event, like retiring or turning 65 — every dollar you take from a taxed fund is tax-free. Lump sum, regular pension (an income stream your fund pays you, like a self-funded salary), or any mix.
Those withdrawals don't even count as income on your tax return, so they can't push you into a higher bracket, trigger the Medicare levy surcharge, or affect the tax on other income you still earn.
The standard advice follows: if you can wait until 60, wait.
The two components: oil and water in one jar
Your super balance is secretly two piles. The taxable component is money that got the entry discount — employer contributions, salary sacrifice, deductible top-ups (all taxed at just 15% going in) — plus all investment earnings. The tax-free component is money you contributed from your own already-taxed savings.
Every withdrawal scoops proportionally from both: if your balance is 80% taxable and 20% tax-free, every dollar you take out is split 80/20. You can't fish out just the tax-free bit.
After 60, the split is trivia — both components come out tax-free anyway. Before 60, or when super passes to someone after your death, the split decides who pays what.
Before 60: the exits and their price tags
Preservation age — the age super unlocks, 60 for everyone now — has a handful of emergency exits: severe financial hardship, compassionate grounds (things like urgent medical treatment or stopping a home repossession), permanent incapacity, terminal illness, and the First Home Super Saver scheme for eligible first home buyers.
The tax varies by door. Terminal illness payments are tax-free and permanent incapacity gets concessional treatment, but hardship and compassionate-grounds lump sums cop real tax: the taxable component is generally taxed at up to 22% including the Medicare levy. The tax-free component comes out untaxed even here.
Early access exists for genuine emergencies, but the discount deal partially unwinds — the system is built to make waiting the better option.
🚨The trap
Anyone offering to 'unlock your super early' outside the official ATO channels is running an illegal scheme. You'll pay full marginal tax, penalties, and possibly lose the lot. There is no secret side door.
The untaxed-fund asterisk
A small number of super schemes — mainly older government and public sector funds — are 'untaxed funds', meaning contributions and earnings weren't taxed along the way. The ATO collects at the exit instead, so withdrawals after 60 from these funds can still be taxed, though at concessional rates.
If you've spent time in the public service or defence, check whether your scheme is taxed or untaxed. Everyone in an ordinary retail or industry fund is in a taxed fund, and the golden rule stands.
💡Quick win
Your annual super statement shows your taxable and tax-free components. Two minutes of reading tells you exactly what any early withdrawal — or a death benefit to your kids — would cost in tax.
What to actually remember
After 60, from a taxed fund: tax-free and invisible to your tax return, no matter how you take it. Before 60: only emergency doors exist, and most charge up to 22% on the taxable slice. Your balance is two components, withdrawn proportionally, which only matters before 60 or after you're gone.
Planning the years around 60 — winding back work, starting a pension, one last salary-sacrifice sprint? Model the moving pieces in our Scenario Planner before you commit.
FAQ
Do I pay tax if I take my whole super as a lump sum at 60?
If you've met a condition of release, like retiring, and your money is in a taxed fund — almost all ordinary funds are — then no. Lump sums and pension payments after 60 are both completely tax-free, and neither appears on your tax return.
How is super taxed if I withdraw it before 60?
You can only withdraw early through official doors: severe hardship, compassionate grounds, permanent incapacity, terminal illness, or the First Home Super Saver scheme. Terminal illness payments are tax-free; hardship and compassionate lump sums are generally taxed at up to 22% (including Medicare levy) on the taxable component.
What happens to the tax when my super goes to my family after I die?
Paid to a dependant for tax purposes — like a spouse or young children — it's generally tax-free. Paid to a non-dependant, like adult children, the taxable component is typically taxed at up to 15% plus the Medicare levy. This is one of the few places the components really matter after 60.
Run your own numbers
Sources: figures checked against ATO published rates and thresholds for FY2025-26 at the review date. See how we check our numbers.
⚠️ General information only — not tax or financial advice. Figures relate to FY2025-26 unless stated otherwise.