Do I have to pay tax on superannuation earnings after 60?

You can usually access your super funds after you cross the age of preservation and either retire or, if still employed, apply for a transition-to-retirement income stream. The age of preservation is 55 years for those born before 1 July 1960, between 55-60 years for those born between 1960 and 1964, and 60 years for those born after 1 July 1964. For example, if you are born in 1966, this means you’ll turn 60, or reach your age of preservation, in 2026. 

If you choose to withdraw your super benefits through a transition-to-retirement income stream at 60, you may not be able to access more than 10 per cent of your super, which is called a cashing restriction. Once you cross 65 years of age, you can withdraw super without any restrictions.

Also, if you choose to receive a transition-to-retirement income stream, you need not work full-time as your earnings will be supplemented by the super income. However, you can continue to salary sacrifice super contributions if your employer allows it, thus increasing your super balance for your eventual retirement. 

Once you retire, you can make a lump sum withdrawal from your super fund and, if the fund does not deduct taxes, declare the super income on your tax return and pay the necessary taxes. You should check with the super fund manager about the breakup of your super benefits to understand how much is taxable.

When you withdraw your super benefits, you will likely receive a payment summary from the fund manager that breaks down the benefits into tax-free and taxable components. The taxable component is further split into taxed and untaxed elements. 

You can withdraw the tax-free component and the taxed element of the taxable component either as a lump sum or as an income stream without paying tax, but you have to pay tax on the untaxed element. If you withdraw the untaxed element as part of an income stream, you will have to pay tax at your marginal rate, which also applies to your salary.

However, withdrawing the untaxed element as a lump sum can require paying tax at the lower of either your marginal rate or 17 per cent, as long as this element does not exceed the untaxed plan cap stipulated by the Australian Tax Office (ATO). For the 2021-22 financial year, the untaxed plan cap is set at $1.615 million, and if you are withdrawing untaxed elements exceeding this amount, the excess will be taxed at the highest marginal rate. Consider checking if your super fund offers defined benefits, which are subject to a cap when withdrawn as an income stream and can affect the tax you need to pay.