Can I withdraw my super as a lump sum?

Question 

I am not yet 60 but have reached my preservation age and have retired. I would like to take out a lump sum from my superannuation to pay out the mortgage.

Can I do this now or do I have to wait until I turn 60?

Answer

Superannuation is a way of saving for your retirement. Your contributions accumulate over time and, usually, superannuation benefits are not available until you reach retirement age and have retired. This will be between ages 55 and 60, depending on your date of birth.

Date of birth                                   Preservation age
Before 1 July 1960                            55
1 July 1960 – 30 June 1961               56
1 July 1961 – 30 June 1962               57
1 July 1962 – 30 June 1963               58
1 July 1963 – 30 June 1964               59
From 1 July 1964                              60

As you have reached your preservation age and have retired, you can receive your superannuation as a lump sum payment, but there are different tax treatments depending on the amount.

If you access your super before age 60 you may be required to pay tax on withdrawals. You can withdraw tax-free up to the “low rate threshold”, currently $175,000 for the 2012/13 year, and $180,000 for 2012/14. This is a lifetime limit and is indexed annually. Any lump sums you withdraw before age 60 above this low rate threshold will be taxed at 16.5% (including Medicare Levy).

Once you reach age 60, any withdrawals – whether lump sum or pension – from a taxed super fund are tax-free. So it may be prudent to wait until after this age if you’d like to withdraw more than the low rate threshold as a lump sum.

So, while it looks like you can access a lump sum now, you need to understand that this may not necessarily be the best strategy for you.

It’s highly recommended that you seek financial advice before making a decision to withdraw any funds from your super.