Super withdrawal options
You can receive your super as a:
Check with your fund to find out what options are available to you.
The super withdrawal option you choose may affect the amount of tax you pay and the amount of money you have for your retirement.
Super income stream
You receive a super income stream as a series of regular payments from your super fund (paid at least annually). The payments must be made over an identifiable period of time and meet the minimum annual payments for super income streams.
The payments don't need to be at the same interval, and the amount paid may also vary. However, a single payment does not qualify as a super income stream. For example, your super payment will not qualify as an income stream if you received a single payment in 2013 and no payments in 2012 and 2014.
Super income streams are a popular investment choice for retirees because they help you manage your income and spending. Super income streams are sometimes called pensions or annuities.
Your super income stream may be either:
To find out how your super income stream will be taxed, see How tax applies to your super.
Once you start your income stream you are unable to add more money to it. Make sure you have made all contributions (including rollover amounts) to your super fund before your income stream starts. Any contributions made after your income stream starts will be put into a new super account at your fund.
You are only able to put more personal contributions into super if you're:
- under 65 years old
- between 65 and 75 years old and gainfully employed on at least a part-time basis.
If you want to include additional contributions to your income stream account, you need to stop your income stream and start a new one.
If your super fund's rules allow it, you can stop your income stream or change the amount of your regular payments. However, there may be income tax implications if you stop your income stream part way through the year.
Account-based income stream
An account-based income stream is paid from a super account held in your name.
Your fund normally continues to invest the money in your super account and adds returns from investments to your account. Your account balance fluctuates with market performance.
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).
You must withdraw a minimum amount each year – based on your age and account balance. There may be income tax implications if your super fund does not pay you the minimum amount each year.
You can continue to receive your super income stream until there is no money in your account. How long your super income stream lasts depends on how much you take out each year and what investment returns you receive.
If there is money left in your super account when you die, it may go to a dependant beneficiary you nominated with your fund or it may become part of your estate.
Transition to retirement income stream
A transition to retirement income stream must be an account-based income stream that can't be converted into a lump sum. This is called a 'non-commutable' super income stream.
Once you retire or turn 65 years old you can stop the transition to retirement income stream and access your super through a different income stream or a lump sum.
You don't have to advise your employer you're receiving a transition to retirement income stream or advise your super fund you're receiving employment income.
You will need to decide from which payer to claim the tax free threshold (on your Tax File Number Declaration NAT 3092). If you claim the tax free threshold with both payers, you may end up with a tax liability at the end of the income year.
Non-account-based income stream
A non-account-based income stream is not paid from an account in your name. Rather than drawing payments out of your super account, you have an agreement with your super fund that they will pay you a regular income – usually guaranteed for life or for a fixed term. This type of income stream is generally paid from a Government super scheme or life insurance company.
This type of super income stream offers certainty by providing a fixed income over a set period of time. However, the fees may be higher because the super fund is taking on the investment risk.
The agreement with your super fund determines whether you can change a non-account based income stream into a lump sum and whether you can leave any super to a beneficiary when you die.
You must withdraw a minimum amount each year – based on your age and the amount you paid to purchase your income stream (the purchase price).
When a super income stream stops
Generally your super income stream stops when there is:
- no money left in your super account
- no longer a member or dependant beneficiary who is automatically entitled to receive the income stream.
Other reasons your super income stream may stop will be set out in the governing rules of your super fund. Common reasons include:
- minimum annual payment not made
- death of the member.
Minimum annual payment not made
Your super income stream stops for income tax purposes if your super fund does not make the minimum annual payment.
If your fund makes the minimum annual payment the following financial year, a new income stream is taken to have started on 1 July of that year for income tax purposes. No further action is required.
What this means for you
If your fund does not make the minimum annual payment, your income stream is taken to have ceased at the start of that financial year.
All payments you have received during the financial year will be treated as super lump sum payments for income tax purposes and you may have to pay additional tax.
Commutation is the process of converting a super income stream into a super lump sum.
If the rules of your super fund allow, you can fully or partially commute your income stream to:
- stop or change the amount of your income stream
- purchase another income stream
- take a lump sum benefit in cash
- rollover the amount back into the super system.
Your super income stream stops when you request to fully commute your income stream payments to a lump sum payment.
The minimum annual payments still apply (on a pro-rata basis) to the income stream payments you receive before a full commutation. This amount is based on the number of days in the income stream payment period:
Minimum annual amount x (days in payment period ÷ days in financial year)
A partial commutation takes effect if you choose to take some of your income stream entitlements as a lump sum payment. Your income stream does not stop because your fund still has an obligation to pay you an income stream.
The amount of your partial commutation will count towards the minimum annual payment unless the amount you commute is rolled over within the super system.
Your partial commutation amount will be taxed as an income stream unless, before the payment is made, you make an election for the payment not to be treated as a super income stream for income tax purposes.
After your death
Your super income stream stops when you die unless you have a dependant beneficiary who is automatically entitled to receive the income stream.
Whether your income stream automatically transfers to your dependant depends on the governing rules of your fund. The rules must specify who is entitled to receive the benefits and whether they will be paid as an income stream or lump sum.
The rules of your fund may give the trustee discretion to pay either a lump sum or income stream to a dependant beneficiary. If your fund has this discretion, your income stream does not automatically transfer and stops when you die. If your fund ultimately decides to pay the relevant dependant beneficiary a super income stream, a new super income stream commences at that time.
What this means for you
You should contact your fund to check what the rules are when you die and if your dependant is automatically entitled to receive a super income stream.
Super lump sum
If your fund allows it, you may be able to withdraw some or all of your super in a single payment. This payment is called a 'lump sum'.
You may be able to withdraw your super in several lump sums. However, if you ask your fund to make regular payments from your super it may be an income stream.
If you take a lump sum out of your super, the money is no longer considered to be super. If you invest the money, earnings on those investments are not taxed as super and may need to be declared in your tax return.