Complying superannuation funds in Australia must not pay out benefits until a condition of release is met. Minimum conditions of release are specified by law, and each superannuation fund’s internal rules may set out additional requirements.
There are significant penalties for breaking the superannuation release rules. The Tax Office has issued warnings against promoters offering early release. See “Beware of offers to withdraw your super early”
Superannuation release
Administering the release of superannuation and making sure the correct conditions are met is the responsibility of the Trustees of the super fund. Conditions for release are listed in Schedule 1 of the Superannuation Industry (Supervision) Regulations 1994.
Budget 2015: Terminally ill patients may get earlier tax-free access to their superannuation with effect from 1 July 2015 due to the extension of the qualifying life-expectancy period from 12 month to 2 years. See: early access to super
Release Triggers
Triggers enabling the legal release of superannuation include:
- Age together with working status (e.g. retirement)
- Special circumstances – including terminal medical conditions, death, severe financial hardship and compassionate grounds (strictly administered)
The Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 transfers the regulator role for early release of superannuation benefits on compassionate grounds from the Chief Executive Medicare (Department of Human Services) to the Commissioner of Taxation (Australian Taxation Office).
Early release
Most early release applications are handled directly by the super fund. However early release on certain specified compassionate grounds can be applied for online through a Centrelink account at myGov – see DHS – early release of super.
Note also that temporary residents leaving Australia have a separate application process.
Aside from special circumstances, you can’t access your super before reaching preservation age. Reaching preservation age means your super funds can be released, subject to your own fund’s internal rules and other conditions, which may include:
- taking a transition to retirement pension between the ages of 55 to 60; or
- retirement after the age of 60, or
- turning 65
News Dec 7, 2017: Early release conditions review. The (through Treasury) intends to review the current early release rules as they apply to severe financial hardship and compassionate grounds. It will also review whether superannuation assets should be available to pay compensation or restitution to victims of crime. See Minister’s media release in which the Minister has also indicated a transfer of the administration of early release on compassionate grounds from the Department of Human Services to the ATO – expected to take effect in 2018.
The Treasury Laws Amendment (2018 Measures No. 1) Bill 2018 transfers the regulator role for early release of superannuation benefits on compassionate grounds from the Chief Executive Medicare (Department of Human Services) to the Commissioner of Taxation (Australian Taxation Office); and also amends the Superannuation (Unclaimed Money and Lost Members) Act 1999 , the Small Superannuation Accounts Act 1995 and the Superannuation Guarantee (Administration) Act 1992 to enable the Commissioner to pay unclaimed money of lost members and other superannuation amounts directly to persons with a terminal medical condition.
The tax on released super
The tax position of funds released from super will depend on:
- age
- the source of funds (taxed, untaxed, tax free)
- whether paid as a lump sum or an income stream (pension)
- status of beneficiary (see death benefits)
Measures contained in the 2016 Budget now limit the value of super funds which can be transferred into the retirement tax-free phase from 1 July 2017.
Essential elements of the changes include:
- The previously existing annual non-concessional contributions cap of $180,000 per year is reduced to $100,000
- For under 65 year olds the 3 years’ non-concessional ‘bring forward’ rule remains, but subject to lower caps
- Individuals with a superannuation balance of more than $1.6 million (indexed and tied to the transfer balance cap) will not be able to make non-concessional contributions from 1 July 2017.
- the proposed abolition of the work test for ages 65 to 74 will not proceed
- proposed catch-up for concessional superannuation contributions will be deferred by one year to 1 July 2018, and will allow unused concessionary cap value to be brought forward for up to 5 years.
For more details see
Preservation age
Your preservation age depends on when you were born as indicated by the following table:
| Date of Birth | Preservation Age |
| Before 1 July 1960 | 55 years old |
| 1 July 1960 to 30 June 1961 | 56 years old |
| 1 July 1961 to 30 June 1962 | 57 years old |
| 1 July 1962 to 30 June 1963 | 58 years old |
| 1 July 1963 to 30 June 1964 | 59 years old |
| 1 July 1964 or later | 60 years old |
When a lump sum super fund withdrawal is made, tax is required to be withheld unless specific conditions are met. The amount of tax to be withheld depends on the source of the funds being paid and the age of the beneficiary.
The following table is a summary of applicable tax rates. References to Low Rate Cap and Untaxed Plan Cap are to the two additional tables below.
Lump Sum Payments – Tax Withholding Rates
Payments of benefits sourced from after-tax (non-concessional) contributions will always be tax free. Benefits sourced from concessional (tax-deductible) contributions will either be a “taxed” or “untaxed” element, and taxed as in the following table.
See also Tax Instalment Tables
| Age | Taxed Element | Untaxed Element |
| Any age – with a terminal illness | Nil | Nil |
| Below Preservation Age | 22% | 32% to Untaxed Plan Cap 49%* above Untaxed Plan Cap |
| From Preservation Age to 59 years | Nil up to the Low Rate Cap 17% above the Low Rate Cap | 17% to Low Rate Cap 32% from Low Rate Cap to Untaxed Plan Cap 49% above Low Rate Cap Untaxed Plan Cap |
| Aged 60 and above | Nil | 17% to Untaxed Plan Cap 49%* above Untaxed Plan Cap |
| The above rates include Medicare and assume TFN is disclosed. From 1 July 2014 medicare levy increases by 0.5% to 2% and a Temporary Budget Repair Levy of 2% is added to the top marginal rates such that the corresponding rate steps become 22%, 17%, 32% and 49% inclusive of medicare levy. *The top marginal rate of 47% (before medicare) includes a Temporary Budget repair Levy of 2% which applies for the 3 year period ending 30 June 2017. | ||
Low Rate Caps
| Low Rate Cap Amounts | |
| Year Ended 30 June: | Amount |
| 2018 | $205,000 |
| 2018 | $200,000 |
| 2017 | $195,000 |
| 2016 | $195,000 |
| 2015 | $185,000 |
| 2014 | $180,000 |
| 2013 | $175,000 |
| 2012 | $165,000 |
| 2011 | $160,000 |
| 2010 | $150,000 |
| 2009 | $145,000 |
| 2008 | $140,000 |
The low-rate cap is a lifetime tax-free limit on superannuation lump sums paid from taxed benefits. The cap amount is indexed annually in line with AWOTE in increments of $5,000 (rounded down) generally made available in February of each year.
Untaxed Plan Caps
| Untaxed Plan Cap Amounts | |
| Year Ended 30 June: | Amount |
| 2019 | $1,480,000 |
| 2018 | $1,445,000 |
| 2017 | $1,415,000 |
| 2016 | $1,395,000 |
| 2015 | $1,355,000 |
| 2014 | $1,315,000 |
| 2013 | $1,255,000 |
| 2012 | $1,205,000 |
| 2011 | $1,155,000 |
The cap amount is indexed annually in line with AWOTE in increments of $5,000 (rounded down) generally available in February of each year.
Tax rates – a summary*
* this is a generalised summary which takes no account of individual circumstances. Please seek professional advice before taking any action.
- The tables below do not include the impact of Medicare Levy.
- Tax is not paid on any withdrawal which is authorised on the basis of a terminal medical condition.
- The tax rates for temporary residents leaving Australia permanently (“DASPs”) are here.
Tax on TAXED element superannuation withdrawals
| INCOME STREAM | |||
| Member’s Age | Up to Low Rate Cap | Above Cap | Offset |
| Below Preservation Age | Marginal Rate | Nil | |
| Preservation Age to 60 years | Marginal Rate | 15% | |
| Over 60 | No tax | ||
| LUMP SUMS | ||
| Member’s Age | Up to Low Rate Cap | Above Cap |
| Below Preservation Age | Lower of marginal tax rate or 20% | |
| Preservation Age to 60 years | 0% | Lower of marginal rate or 15% |
| Over 60 | No Tax | |
Untaxed super is essentially funds on which tax has not been paid on the member’s behalf, that element of the member’s fund value therefore being “untaxed”. Depending on the member’s tax position, the tax on withdrawal of untaxed elements may be higher than the total tax applicable to fully taxed funds.
Age-based taxability of withdrawals are differentially treated with reference to both Low Rate and Untaxed Plan Caps.
Tax on UNTAXED element superannuation withdrawals
| INCOME STREAM | ||
| Member’s Age | Tax rate | Offset |
| Below Preservation Age | Marginal Rate | Nil |
| Preservation Age to 60 years | Marginal Rate | Nil |
| Over 60 | Marginal Rate | 10% |
| LUMP SUMS | ||||
| Member’s Age | Up To Low Rate Cap | From Low Rate Cap To Untaxed Plan Cap | Up To Untaxed Plan Cap | Over the cap |
| Below Preservation Age | Lower of marginal rate or 30% | Marginal rate | ||
| Preservation Age to 60 years | Lower of marginal rate or 15% | Lower of marginal rate or 30% | Top marginal rate | |
| Over 60 | Lower of marginal rate or 15% | Top marginal rate | ||
Rates in the above tables do not include Medicare levy the general rate for which increased by 0.5% to 2% from 1 July 2014.
Death Benefits
Death benefits paid to dependent beneficiaries are generally afforded generous tax treatment.
| Superannuation death benefits | ||
| Type of benefit | Tax rate | Offset |
| Pension – tax free component | nil | |
| Pension – taxable component – both member & beneficiary under 60 | Marginal Rate | 15% |
| Pension – taxable component – member or beneficiary aged 60 or over | nil | |
| Lump sum – tax free component | nil | |
| Lump sum – taxable component – dependent beneficiary | nil | |
| Lump sum – taxable component plus Section 295-485 anti-detriment amount – dependent beneficiary * (removed from 1 July 2017) | nil | |
| Lump sum – taxable component – non-dependent beneficiary | 15% | |
| Lump sum – untaxed component | 30% | |
* spouse, former spouse or child. For more in this complex area see: “Death and taxes” (smsfalliance.com.au)
Rates in the above tables do not include Medicare levy the general rate for which increased by 0.5% to 2% from 1 July 2014.
The Taxation Office has released guidance on the commutation of death benefit income streams before 1 July 2017 see Practical Compliance Guideline PCG 2017/6 and article: Existing death benefit pensions, transfer balance caps and the ATO lifeline – PCG 2017/6
Further information and resources
- SMSF Case Studies
- SIS Act and SIS Act regulations
- Rules governing release of super benefits
- How Tax Applies To Your Super
- Tax tables and links – see Tax Tables
- Early access to benefits – financial hardship and compassionate grounds and getting approval – (DHS)
- Account based pensions – Minimum annual payments for super income streams
- Transition To Retirement
- Re-contribution strategy
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This page was last modified 2018-03-05
