Accessing Super

When can I access my super?

Throughout your work life, your employer sets aside a portion of your wage into a superannuation fund towards your retirement. For some, this can add up to hundreds of thousands of dollars that are inaccessible until retirement. In our experience, for those who try to access their super prior to reaching the appropriate age – the tax consequences mean that you lose money set aside for your retirement.

When can I access my super?

Generally, you can access your superannuation once you have met your preservation age or if you’ve met a condition of release. Depending on your age – the tax consequences of accessing your super will have different consequences.

Preservation age

Preservation age is generally the earliest age you can access your superannuation, and is calculated based on your date of birth. The following table provides the calculation for preservation age:

 Condition of release

The common condition of release include:

• member has reached preservation age and retires
• member has reached preservation age and begins a transtiion-to-retirement income stream
• member ceases employment on or after the age of 60
• member is 65 years old (even if they haven’t retired)
• member has died.

In special circumstances, superannuation can be released before the member has reached their preservation age. These circumstances include:

• terminating gainful employment
• permanent incapacity
• temporary incapacity
• severe financial hardship
• compassionate grounds
• terminal medical conditions
• First Home super saver scheme
•  COVID-19 early release of super

If money is taken from your superannuation and you haven’t met either a condition of release or preservation age, the money will be treated as ordinary income and taxed at your marginal rate.

Understanding the components of super

It is important to understand the components of your superannuation to understand how each component will be taxed on withdrawals.

There are three components:

1.  Tax-free component: This component is made up of after-tax contribution, including non-concessional contributions, downsizer, small business CGT retirement exemption and 15 years retirement exemption contributions.

2.  Taxable component – taxed element: This component is made up of pre-tax contributions, including employer contributions, personal concessional contributions. Further, earnings and capital gains in the fund are included in the taxed element. The super fund has paid 10-15% tax on these amounts.

3. Taxable component – untaxed element: This component is made up of contributions and earnings on which no tax has been paid. Generally only seen in public sector super schemes or constitutionally protected funds.

How can I access my superannuation?

Superannuation monies can be accessed in accumulation or pension phase, by payment of a lump sum or an income stream. The tax treatment us dependent on the type of payment taken and your age at the time of payment.

For individuals between 55 and preservation age, the tax implications are as follows:

• Tax-free component: 0% tax
• Taxable component – taxed element: If taken as a lump sum, you will be taxed at your marginal tax rate or 22%, whichever is lower. If taken as an income stream, you will be taxed at your marginal tax rate.
• Taxable component – untaxed element: If taken as a lump sum, you will be taxed at your marginal tax rate or 32%, whichever is lower. If taken as an income stream, you will be taxed at your marginal tax rate.

For individuals between preservation age and before 60, the tax implications are as follows:

• Tax-free component: 0% tax
• Taxable component – taxed element: If taken as a lump sum, you will be taxed at your marginal tax rate or 17%, whichever is lower. If taken as an income stream, you will be taxed at your marginal tax rate less 15%.
• Taxable component – untaxed element: If taken as a lump sum, you will be taxed at your marginal tax rate or 32%, whichever is lower, or potentially at the top marginal tax rate if above the low rate cap amount. If taken as an income stream, you will be taxed at your marginal tax rate.

For individuals over 60, accessing an  income stream will be tax-free. If you access a lump sum with a taxable component- untaxed element, you will be taxed between 15 – 45% depending on how much of the untaxed plan cap you have previously used.

How can Tax Controversy Partners help you?

Navigating superannuation laws can be very confusing. Here at Tax Controversy Partners we want to assist you through the process of accessing your superannuation. Further, If you have illegally accessed your super early, we can assist you through the ATO process. Please contact us using our online contact form, via email at admin@taxcontroverypartners.com.au or by phone at 02 8513 3813.