You’ve worked hard, built up your super balance and you’re looking forward to retiring early. To help make that happen, you need to understand when you can start drawing down your super.
The government puts age and other restrictions on when you can access your super, to help ensure that you use your super savings for retirement purposes.
Generally you can access your super:
- When you turn 65 (regardless of whether you keep working or not).
- When you reach your preservation age and permanently retire
- When you reach your preservation age and start a transition to retirement income stream
- When you become permanently disabled or terminally ill.
- In some special circumstances including compassionate grounds and severe financial hardship.
When you reach ‘preservation age’ – which is the age you’re generally first allowed to access your super – it’s up to you to decide the right time to draw down your super. You’ll need to think about how the timing fits in with your financial situation and personal circumstances.
For example, you may pay tax if you withdraw your super before you turn 60, either via an income stream or as a lump sum, although some of it might be tax-free.¹
Working out your preservation age
Your preservation age depends on your date of birth. When you turn 65, you can generally access your super regardless of whether you retire or not.
|Your birthday||Your preservation age|
|Before 1 July 1960||55|
|1 July 1960 – 30 June 1961||56|
|1 July 1961 – 30 June 1962||57|
|1 July 1962 – 30 June 1963||58|
|1 July 1963 – 30 June 1964||59|
From 1 July 1964
Source: Australian Taxation Office (ATO) website. 26 August 2015.
Accessing your super through a transition to retirement (TTR) strategy
When you reach your preservation age, you can access your super as a transition to retirement pension without having to retire. TTR strategies work in one of two ways:
- Work full time while your employer continues to make contributions into your super account. You may also salary sacrifice into your super. The amount you sacrifice is then supplemented by a transition to retirement pension drawn from your super. This could lead to the following tax concessions:
- transition to retirement pension payments may be taxed at a lower tax rate than the salary they have replaced and
- earnings within your transition to retirement pension balance are tax-free, unlike regular super where earnings are taxed at up to 15%.
- Cut down your working hours and draw on your super through a transition to retirement pension to supplement your lost income.
There are rules and limitations in relation to TTR and it may not suit your individual circumstances as the tax rules can be complex. It’s a good idea to seek professional financial planning advice from a financial planner to help you decide if it’s the right choice.
¹Tax may still apply to withdrawals after age 60 from untaxed funds such as the Commonwealth Government Sector Super Scheme
This document has been prepared by Colonial First State Investments Limited ABN 98 02 348 352, AFS Licence 2323468 (Colonial First State) based on its understanding of current regulatory requirements and laws as at 3 June 2015. While all care has been taken in the preparation of this document (using sources believed to be reliable and accurate), to the maximum extent permitted by law, no person including Colonial First State or any member of the Commonwealth Bank group of companies, accepts responsibility for any loss suffered by any person arising from reliance on this information.
This document does not take into account any person’s individual objectives, financial situation or needs. You should read the relevant Product Disclosure Statement (PDS) before making any recommendation to a client. Clients should read the PDS before making an investment decision and consider talking to a financial adviser.