Tag Archives: SMSF

What happens to your super when you retire?

By Robert Wright /November 21,2025/

Superannuation is one of the important pillars of savings in retirement for most Australians. After years of working and contributing to your super fund, retirement is when you are finally able to access it. Whether retirement is just around the corner or still a few years away, it’s worth understanding your options.

In this article, we’ll walk you through your options on what do with your super when you retire, how is it taxed and what happens if there’s any left when you pass away.

When can you access your super?

You can usually access your super when you reach your preservation age (currently age 60) and retire. Alternatively, you can start accessing it once you turn 65, even if you’re still working.

There are other special circumstances where you might be able to access it earlier, like severe financial hardship or permanent disability but generally speaking, retirement is the key trigger.

Your options once you have access to your super

Once you retire and meet a condition of release, your super becomes accessible for you to withdraw but that doesn’t necessarily mean you have to withdraw and use all of it.

You’ve got a few main options and you may prefer a combination of these:

1. Leave it in your super fund (Accumulation phase) 

Yes, you can actually choose to leave your super where it is, in its accumulation phase even after you retire.

If you don’t need to access the money straight away, you can leave your super invested in the fund’s accumulation account. Your money can keep growing (taxed at 15% on earnings) and you can access it when you’re ready.

So, while this may suit short-term plans, it may usually not be the most tax effective option when compared to other options like starting a superannuation pension in retirement, which is often tax free and funded with money from your superannuation savings.

2. Take a lump sum 

Where access to funds is required, you may prefer withdrawing a lump sum from super. This can help you in various ways like paying off a mortgage, clearing credit cards or personal loan debt, covering medical costs, funding travel expenses or investing elsewhere (e.g. property, shares outside of super).

However, this decision should be carefully considered as withdrawing a lump sum or lump sums can reduce how long your super lasts. It’s also worth considering how that money will be managed outside super, as it may be subject to different tax treatment or may impact any Centrelink entitlements like the Age Pension.

3. Start a superannuation pension (account-based income stream)

An account-based pension lets you convert your accumulated super into a regular income stream. However, once an income stream is started with a set balance, you cannot add more monies to the ongoing account-based pension unless the pension is commuted and restarted again. If you need access to your superannuation savings, starting an income stream is a popular option which can be tax effective.

Where access to the super savings is required, an income stream can be a good option because:

• You can receive regular and flexible payments (monthly, quarterly, etc).
• You can choose how much to set as regular income for your pension payment (subject to government set minimum limits).
• Earnings are tax free once you’re in pension phase.
• Payments can be adjusted as your needs change.
• You keep control over your investment strategy.

You can still withdraw lump sums if needed but many people like the idea of a steady income, much like a salary. However, consider that the ongoing income payments can reduce your account balance over time.

4. Can a lifetime annuity help? 

One of the biggest concerns for retirees is running out of money.

If you want income for life, no matter how long you live, lifetime income streams such as a lifetime annuity can help you achieve that.

Unlike an account-based pension (which relies on how long your money lasts), a lifetime annuity is more like an insurance product. You invest a lump sum from your super and in return, receive a regular income for the rest of your life.

Some retirees consider using a combination of a pension and an annuity – the pension provides flexibility and the annuity can provide peace of mind. However, lifetime annuities are designed to be held for life. Although there may be flexibility to access a lump sum if needed, there may be break cost considerations.

Can I combine these options?

Absolutely and many retirees choose to do so.

You might prefer to consider:

• Leaving some of your super invested in accumulation phase.
• Taking a lump sum to pay off debts.
• Starting a super pension to draw regular income.
• Using part of your super to start a lifetime annuity.

The right mix will depend on your lifestyle, goals, health, family situation and other sources of income, including the Age Pension. There are many more options we have not discussed.

The Age Pension and Super: How they can work together

The Age Pension is a government payment designed to help eligible Australians in retirement. As of 2025, you can apply for the Age Pension from age 67.

There are also concessions and benefits that come with it, such as reduced utility bills and medical costs, so it’s well worth checking your eligibility.

Eligibility is also based on your means – your income and assets. Centrelink includes your super in the assets and income tests. However, the assessment can differ if your super is converted into an income stream like a lifetime annuity.

Age Pension, combined with other sources of super based income like an account-based pension and/or a lifetime annuity, can help make your money last longer. It acts as a safety net if your super runs down over time. This can be a powerful way to stretch your retirement savings further.

How is my super taxed when I retire?

The earnings on your super are usually taxed at a maximum rate of 15% whilst the super remains in accumulation phase. Where an account-based pension is started, the earnings in the pension phase are tax free.

If you’re age 60 or over, any withdrawals from your super (lump sum or income) are usually tax free if you’ve permanently retired.

However, if you’re under 60 or receiving certain types of benefits (like defined benefit pensions), tax rules may be a little different. It’s worth speaking to a financial adviser to understand your situation.

How do I make my super last?

Australians are living longer than ever, and therefore it is important to strategise and ensure that your retirement savings can last for a long time.

Here are a few strategies to consider:

• Budget and plan – Work out how much income you need as opposed to how much you want. Consider your spending habits and lifestyle goals to help ensure you don’t withdraw more than you need. Work out how long your super will last.
• Stay invested – Your money doesn’t have to stop working for you when you retire. Draw appropriate amounts based on your retirement objectives and consider keeping the balance invested in an option that suits your risk tolerance and goals.
• Mix your income sources – Layering your income can help your super last longer. One way you could consider meeting your essential expenses throughout retirement, the Age Pension can work together with a secure, lifetime income stream, such as a lifetime annuity, to provide regular income payments for life. Once your essential expenses have been met through a combination of the Age Pension and a lifetime income stream, you could meet your additional desired expenditure goals with income from an account-based pension.
• Review your investments – Ensure they match your risk tolerance and income needs in different phases of your retirement.

What happens to my super when I die?

If you don’t use all your super before you pass away, the remaining balance is generally paid out to your beneficiaries, either as a lump sum or income stream (depending on your instructions and their eligibility) or your estate.

This is known as a death benefit and it can be left to your spouse or partner, your children, certain dependant or interdependents or your estate. It can either be paid as a lump sum or can be paid as an income stream. The tax treatment depends on who receives the benefit. For example, a lump sum payment to a spouse is tax free.

To make sure your wishes are followed, it’s important to nominate your beneficiaries with your super fund. You can make a binding death benefit nomination to ensure your super goes exactly where you want it to. Otherwise, your super fund will decide (within legal guidelines).

Steps toward a stronger retirement

Super can be one of the most flexible and tax effective ways to fund your retirement but simply reaching retirement age doesn’t mean your financial decisions stop. In fact, how you choose to access and manage your super can shape your lifestyle for decades to come.

Whether you choose a lump sum, a regular income or a combination, planning ahead is essential. Think about how long your money needs to last, how to make the most of your tax benefits and how to combine super with other income sources like the Age Pension. A financial adviser can help you tailor your retirement needs with the right options.

Super is more than just savings. The right strategy can help your super last longer, support your quality of life, and give you peace of mind.

 

Source: Challenger

Pros and cons of Self Managed Super Funds (SMSFs)

By Robert Wright /November 20,2024/

While self managed super funds are not for everyone, they do offer significant benefits. Running an SMSF successfully requires investment, legal, super and admin skills – or the ability to get help from people who have those skills.

Having control over how your retirement savings are invested is one of the many benefits of SMSFs.

On the flip side, the responsibilities and management skills required to run an SMSF are significant. This is because you’re accountable for your SMSFs regulatory compliance, not your accountant, financial adviser or solicitor.

What is an SMSF?

An SMSF is a private super fund you manage yourself, giving you more control over how your retirement savings are invested.

SMSF members must be trustees (or directors of the self managed super fund corporate trustee) and are beneficiaries of their SMSF. This means SMSF members are responsible for managing the fund’s investments and compliance with super and tax laws. This hands on approach sets SMSFs apart from public super funds, which are managed by financial institutions.

Benefits of SMSFs

1. Access to more investment options

Having an SMSF provides more choice and freedom to access investment options that would otherwise be unavailable through a public super fund. This includes assets like real property, art and collectibles (such as stamps and coins), as well as physical gold.

Unlike investing with an industry, bank or retail super fund, your SMSF can borrow to invest in property, using a Limited Recourse Borrowing Arrangement (LRBA).

This strategy is a good option to help expand your investment portfolio. However, there are restrictions and compliance requirements. The Australian Taxation Office (ATO) has warned investors of the dangers of over investing (and over borrowing) into property within SMSFs.

2. Control

If you’re a member of an SMSF, you have greater control over how your super’s invested while working, and how it’s paid when you retire.

This means you can invest in many of the products available to public super funds, as well as some products that aren’t. For example, SMSFs can invest directly in real estate, rather than being restricted to property trusts as many public funds are.

3. Tax benefits

You’re entitled to the same reduced tax rates that are available through super so your investment return is taxed at a maximum of 15% (provided that your SMSF is a complying fund) rather than your personal income tax rate which could be as high as 45%. In addition, any payments received after the age of 60 are tax free.

These tax benefits are common to all super funds, not just SMSFs. However, SMSFs have more flexibility to use tax strategies around capital gains, taxable income or franking credits.

4. More scale to access opportunities

Generally speaking, an SMSF can have up to six members. Bringing six investors’ money together, offers greater scale to access investment opportunities that may not be available to you as an individual investor.

Having scale may also help to keep fees down. This is because you can pool your assets and share expenses, leading to potential cost savings, which means you may have more funds available for investment growth.

5. Estate planning

One often overlooked advantage of an SMSF is that they can provide greater flexibility or control with estate planning, if a member was to pass away.

An SMSF trust deed may also provide how and to whom death benefits will be distributed as long as these align with super law. The deed may also allow for cascading death benefit nominations or the exclusion of certain beneficiaries. Benefits could also be distributed to beneficiaries in a tax effective way.

Considerations to be aware of with SMSFs

1. Responsibility

Managing an SMSF is not easy. As the trustee, you need to ensure the fund complies with all relevant regulations otherwise you could face severe consequences for getting it wrong.

If the fund is deemed to have breached its compliance responsibilities, penalties can include fines and civil or criminal proceedings. Depending on the offense, tax penalties could be increased, including fund returns being taxed at the top marginal tax rate as opposed to the concessional super rate of 15%.

2. Expertise

What investors often overlook is the financial and investment expertise required to run, or be involved in running an SMSF.

As a trustee, you’ll be responsible for creating and implementing your own investment strategy – one that will need to deliver enough returns to adequately fund your retirement.

This means you need to:

• Understand how investment markets work, including share markets.
• Record your investments and transactions.
• Ensure your fund is adequately diversified to help manage risk.

You’ll also need to remain up to date on any changes to legislation that affect SMSFs as these may have compliance requirements.

An understanding of how to manage legal documents, such as a trust deed, is also beneficial. However, a legal professional could help you with this.

3. Time

The administration and management of an SMSF is time intensive so if time is something you’re short of, an SMSF may not be a good option. On the other hand, many SMSF investors enjoy the sense of involvement and purpose that running their own fund brings.

4. Higher insurance costs

Public super funds can generally provide cheaper insurance to their members than SMSFs. This is because they have large memberships and can negotiate discounted bulk premiums with insurance providers.

5. Outsourcing your SMSF to professionals

If you find you don’t have the time or investment knowledge to manage your SMSF, you can outsource this to investment managers, financial advisers or other experts. This will come at an additional cost though.

6. Minimum amount required for SMSFs

There is a lot of controversy around what should be a reasonable amount to set up an SMSF.

There’s no minimum amount required to set up an SMSF but depending on the fund’s complexity and structure, set up costs, administration, reporting and legal fees, it can become expensive. It’s generally more cost effective if your SMSF has a higher balance.

 

Source: MLC

Expanding SMSFs for the expanding family?

By Robert Wright /May 19,2023/

It has finally happened. Recommended by the Cooper Super System review in 2010, put forward in the Federal Budget four years ago by then Treasurer Scott Morrison and finally passed on 17 June 2021, the maximum amount of members allowed in a Self Managed Super Fund (SMSF) has expanded from four to six.

Despite the previous maximum of four members, the vast majority of SMSFs had only one or two members therefore this increase did not exactly stop the press. Yet the question remains, why would an SMSF want six members and what are the disadvantages?

The most logical reason for a fund to grow to six members is to gather a larger pool of assets to invest. A larger amount to invest could open up residential and commercial property investment, or other nonstandard assets that require a large capital outlay, such as fishing licenses or marina berths.

Greater diversification for what many would consider standard assets, such as shares and managed funds, could be better achieved with six members.

Additionally, if the SMSF is paying fixed accounting and administration costs, having six members would also result in a lower cost per member.

If a large family is running two funds currently due to the previous four member limit, the funds can now be consolidated. However, it would be a capital gains tax event for the fund that is being closed down. Therefore consideration should be given to the unrealised tax position for each fund when deciding which to keep and which to close.

The main disadvantage of a six member fund is just that, the six members. The larger the fund, the greater number of people who are involved in the decision making process and the greater number of people who have to agree. With a greater number of members there is also the greater likelihood that there will be a falling out or there will be a marriage breakdown that could result in the division of superannuation. This would be particularly detrimental if the six member fund was established to invest in one large illiquid asset.

The chances of one of these unfortunate events occurring magnifies with each additional member, so it goes without saying that six member funds and the accountants and advisers that assist them will see their fair share of grief and the financial consequences that result.

For current SMSF trustees who are considering taking advantage of this legislation change, a review of the trust deed should be completed and a corporate trustee should be appointed if one is not already in place.

The SMSF member limit increase to six is good. It provides more choice in a superannuation environment which is known for restrictions and adverse government legislation changes. Opening up self managed superannuation funds to six members does increase additional investment opportunities, however serious consideration should be given to potential ramifications prior to proceeding down this path.

If you would like to discuss establishing an SMSF with six members, or adding members to an existing SMSF, please contact your financial adviser.

Source: Bell Potter

Downsizer contributions: what are the rules?

By visual /May 13,2020/

In the first year since older Australians have been allowed to make downsizer contributions, 4,246 people have contributed a total of $1 billion in downsizer contributions to their super funds (1 July 2018 – 1 July 2019).

This not only allows retired people to have access to more money to fund their retirement, it’s also likely to have freed up new property for sale for first home buyers and young investors.

Although this is good news for people who have benefited from this scheme, some people have reportedly missed out because they didn’t understand the eligibility criteria.

Here’s a summary of the rules around making downsizer contributions:

• You need to be 65 or over at the time of making the contribution.
• You or your spouse need to have owned your home for more than 10 years prior to the sale.
• You don’t need to be working.
• Both you and your spouse can make a concessional downsizer contribution of $300,000 each if you both lived in the property at some point in time and the proceeds of the sale are exempt or partially exempt from capital gains tax (CGT) under the main residence exemption or because you bought the property before 20 September 1985. If only you lived in the property at some point in time then only you, not your spouse, can make a downsizer contribution (as long as you meet all other conditions).An investment property that you haven’t lived in is not eligible.
• Houseboats, caravans or mobile homes are not eligible.
• The total super balance test of $1.6 million and the $100,000 non-concessional contributions cap restrictions don’t apply.
• You need to make all downsizer contributions within 90 days of receiving the proceeds of sale, usually the date of settlement.
• You can only downsize once.
• You don’t need to buy another property to use the scheme.

If you sell your home and put some of the proceeds into super, you need to consider how this will affect your Centrelink benefits. Your super balance is counted towards the means test so you could potentially lose some, or all, of your Centrelink benefit if your super balance goes up.

Source: IOOF