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Retirement Tax Strategy After 60
Turning 60 changes how retirement income is taxed in Australia.
Many retirees assume their income becomes entirely tax-free. That is not always the case.
While super pension income is generally tax-free after age 60, other income sources such as investments, rental property or part-time work may still attract tax.
A well-structured retirement tax strategy can significantly improve long-term retirement income.
How Tax Changes After Age 60
Once you reach 60, superannuation rules change significantly.
If you start an account-based pension, the following generally apply (subject to current ATO rules):
Pension payments from super are usually tax-free
Investment earnings inside pension phase are generally tax-free
Lump sum withdrawals from taxed super funds are usually tax-free
However, these benefits only apply to funds in pension phase.
Super balances that remain in accumulation phase are still taxed at 15% on earnings.
Understanding the Transfer Balance Cap
The Transfer Balance Cap (TBC) limits how much super can move into tax-free pension phase.
This cap is indexed periodically under ATO rules.
Example:
If a retiree has $2.2 million in super and the cap is $1.9 million, then:
Component | Tax Treatment |
$1.9m (pension phase) | Earnings generally tax-free |
$300k (accumulation phase) | Earnings taxed at 15% |
Structuring assets efficiently within these limits is a key part of retirement tax planning.
Tax on Different Retirement Income Sources
Retirement income often comes from multiple sources.
Understanding the tax treatment of each source is important.
Income Source | Tax Treatment |
Super pension (age 60+) | Generally tax-free |
Age Pension | Taxable but often below tax threshold |
Rental income | Taxable |
Dividends | Taxable (franking credits may apply) |
Part-time employment | Taxable |
A well-designed income strategy balances these sources.
Strategy 1: Move Super Into Pension Phase
One of the most effective tax strategies is converting super into an account-based pension once eligible.
Benefits may include:
Tax-free pension income after age 60
Tax-free investment earnings in pension phase
Flexible income withdrawals
This can materially reduce lifetime tax paid in retirement.
Strategy 2: Balance Super Between Spouses
For couples, retirement tax efficiency often improves when super balances are reasonably balanced.
Because:
Each individual has their own Transfer Balance Cap
Both partners can receive tax-free pension income
Balancing super before retirement can maximise tax-free income streams.
Strategy 3: Manage Investment Income Outside Super
Not all retirement assets sit inside super.
Investments outside super may generate:
Dividends
Interest
Capital gains
Strategies may include:
Using franking credits effectively
Structuring ownership between spouses
Timing asset sales to manage capital gains tax
Tax outcomes depend on personal circumstances.
Strategy 4: Consider Downsizer Contributions
Selling the family home may allow eligible retirees to make a downsizer contribution to super.
This can:
Increase tax-effective super balances
Provide additional retirement income flexibility
However, this may also affect Age Pension eligibility under Services Australia rules.
Strategy 5: Coordinate Withdrawals Strategically
Retirees often withdraw from super automatically without planning.
Instead, withdrawals can be structured to:
Minimise tax outside super
Optimise Age Pension outcomes
Preserve tax-free pension balances
Retirement income planning should coordinate all income sources.
Common Retirement Tax Mistakes
Many retirees unintentionally increase their tax burden by:
Leaving large balances in accumulation phase
Not balancing super between spouses
Ignoring the Transfer Balance Cap
Selling investments without considering capital gains
Failing to coordinate retirement income sources
Tax strategy becomes increasingly important as retirement progresses.
FAQs
1. Is super tax-free after age 60?
Super pension payments are generally tax-free after age 60, subject to current ATO rules.
2. Do retirees still pay income tax?
Yes. Income from investments, employment or rental properties may still be taxable.
3. Is the Age Pension taxable?
The Age Pension is taxable income but many retirees pay little or no tax due to tax thresholds and offsets.
4. What is the Transfer Balance Cap?
It is the limit on how much super can move into tax-free pension phase.
5. Should I convert all super to a pension at retirement?
Not always. Some funds may remain in accumulation phase depending on tax strategy and transfer cap limits.
6. Can tax planning increase retirement income?
Yes. Reducing tax leakage can materially improve long-term retirement cash flow.
Structure Your Retirement Income Tax-Efficiently
Tax rules change significantly after age 60, but many retirees do not structure their income to take advantage of these changes.
At What If Advice, we help Australians design retirement income strategies that consider superannuation rules, investment taxation and Age Pension eligibility under current ATO and Services Australia regulations.
If you are approaching retirement or already drawing income from super, structured advice can help improve tax efficiency and long-term sustainability.
Book a retirement tax strategy consultation with What If Advice.
General Advice Disclaimer
This article provides general information only and does not take into account your personal objectives, financial situation or needs. Before making any financial decisions, consider whether the information is appropriate to your circumstances and seek personal advice from a licensed financial adviser. Superannuation, taxation and Age Pension rules are subject to change under current ATO and Services Australia regulations.