Superannuation Archives - Page 2 of 4

Super and tax obligations when you employ working holiday makers

Admin 21st April, 2026

If you employ working holiday makers, there are no special rules for your mandatory super contributions. You must treat them like resident employees by contributing 12% of their earnings to a fund in their name, giving them a choice of fund, and making the super contributions on time.

Super contributions must be received in your employee’s fund by 28 July 2026 for this last quarter of the financial year, or within seven business days of every payday from 1 July 2026 (the same rules that apply to resident employees). Otherwise you may be liable for the superannuation guarantee charge.

However for tax, there are difference in your obligations for working holiday makers compared to resident employees.

What is a working holiday maker?
Working holiday makers (WHMs) are temporary visitors to Australia who hold a Working Holiday visa (subclass 417) or Work and Holiday visa (subclass 462). This definition is important for tax purposes, as tax must be withheld at special rates for WHMs.

Your obligations when employing WHMs
Check legal entitlement to work: you must take reasonable steps to check that a person is legally entitled to work in Australia before they start employment.

Visa conditions: you need to ensure the employee’s work complies with their visa conditions. You can check an employee’s visa conditions on the Australian Government’s Visa Entitlement Verification Online (VEVO) system.

Register with the ATO as a WHM employer: penalties may apply if you fail to register with the ATO as an employer of WHMs.

Withhold tax at the special WHM rates: registered employers of WHMs must withhold tax at the rate of 15% from the first dollar your WHM earns up to $45,000. Tax rates change for amounts above $45,000.

What if you’re not registered as a WHM employer?
Penalties may apply if you employ someone with a visa subclass 417 or 462, but don’t register as an employer of WHMs.

Addressing questions from your WHMs
Understanding some general basics can help you answer frequent questions without overstepping into personal advice.

Working holiday makers who leave Australia are able to claim their super as a “departing Australia superannuation payment” (DASP) once they’ve left Australia and their visa has ceased.

The tax rate on DASPs received by working holiday makers is a whopping 65% on any taxable component (such as mandatory superannuation guarantee contributions).

If a WHM doesn’t claim their super from their fund within six months of departing Australia, their super fund is required to transfer it to the ATO (where it can still be claimed).

Further details on DASPs and WHMs are available on the ATO website at https://www.ato.gov.au.

What to do now
The reassuring part is that meeting your obligations usually comes down to getting the fundamentals right. Check whether the worker is an employee for super purposes, use the correct super rate, pay on time using the right process, and keep clear payroll records.

Quarterly due dates remain important now, and payday super changes apply from 1 July 2026 for working holiday makers in the same way as for other employees.

If you’re unsure about your obligations for a particular worker, your registered tax agent can help. Where personal super decisions arise for your workers, they should consult a licensed financial adviser.

Seeking professional advice for your circumstances can give you confidence that you’re doing the right thing for your business and your staff.

Is your café, restaurant or takeaway on the ATO’s radar?

Admin 7th April, 2026

If you run a food business, a joint operation by two of Australia’s most powerful regulators should put you on high alert and prompt a review of how you’re managing your obligations.

What happened? Gold Coast fast food outlets, restaurants and cafés have received surprise visits from the Fair Work Ombudsman (FWO) and the ATO.
Operation Crimson involved the two regulators inspecting about 25 eateries in Nerang and surrounding suburbs, to check they are paying employees correctly and complying with record-keeping, tax and super laws.
The targeted inspections were based on factors such as anonymous reports to the FWO from employees, a history of non-compliance, or employment of vulnerable workers such as visa holders.
For the FWO, Operation Crimson is part of its national Food Precincts Program of surprise inspections of fast food outlets, restaurants and cafés, commonly in “cheap eats” precincts.

Why does this matter? The track record in this sector is concerning.
The FWO previously recovered more than $215,700 in wages for nearly 450 underpaid workers after auditing 50 Gold Coast eateries in 2020, with 88% of those businesses found non-compliant with workplace laws.
The FWO secured more than $16 million in court-ordered penalties against employers in the fast food, restaurants and cafés sector nationally in 2024–2025.
These penalties included the FWO’s largest-ever penalty of $15.3 million against the former operators of Sushi Bay outlets, for deliberately exploiting vulnerable migrant workers.
The ATO has made clear it’s not just watching – it is acting.
The ATO uses “a range of sophisticated methods to detect shadow economy activities”, and works closely with partner agencies like the FWO, regularly sharing intelligence and community tip-offs.

What’s on the radar? Food businesses that employ young workers need to take particular care in two key areas.
First, pay rates. Most awards and enterprise agreements include specific minimum wages for juniors (workers under 21), based on their age.
Under the Fast Food Award, junior rates range from 40% of the adult rate for employees aged under 16 up to 90% for 20-year-olds. Juniors who serve or sell alcohol must be paid the adult rate regardless of age.
Second, superannuation. You must pay the superannuation guarantee on payments you make to an employee under 18 years old if they work more than 30 hours in a week, regardless of how much you pay them.
This is based on actual hours that week, not averaged across a pay period. A young worker doing a big week of shifts could trigger a super obligation even if other weeks do not.
Also, timing should be front of mind: payday super applies from 1 July 2026, meaning super needs to be in employees’ funds within seven business days of payday.

What should I do now? If you employ staff in a café, restaurant or takeaway, check that you are:

Paying the correct award rates, including the right junior rates based on each employee’s age.
Tracking actual hours worked each week for employees under 18 to determine whether super is owed that week.
Meeting your superannuation obligations for all eligible employees.
Keeping accurate records of time worked, rosters and payslips.
Correctly classifying employees under the right award.

You can use the FWO’s Pay and Conditions Tool to calculate minimum pay rates – visit www.fairwork.gov.au for more on junior pay rates.
For super eligibility, visit www.ato.gov.au and search for “super for employers”.

Need help? Employment obligations in the food sector are complex, and getting them wrong can be costly.
Contact our office today to review your payroll, record-keeping and superannuation compliance before a regulator does it for you.

Payday Super – what business owners and employees need to know

Admin 10th March, 2026

From 1 July 2026, one of the most significant superannuation compliance reforms in decades will take effect. Known as “Payday Super”, the change will require employers to pay Super Guarantee (SG) contributions at the same time as wages, rather than quarterly. The reform is designed to reduce unpaid super, improve retirement outcomes and strengthen regulatory oversight through real time reporting to the Australian Taxation Office (ATO).

What is changing?
Under the current system, employers must pay SG contributions at least four times per year. From 1 July 2026, employers will be required to pay super within seven business days of paying employees their wages. This effectively aligns super payments with each payroll cycle. While the SG rate remains at 12 percent, the timing of contributions will change significantly. The Government’s objective is to reduce the estimated billions of dollars in unpaid super each year by improving transparency and earlier detection of non-compliance.

What business owners need to know

Cash flow management will need adjusting – Many businesses currently benefit from holding super payments until quarterly due dates. Payday Super removes that flexibility. Employers will need to ensure funds are available at each pay cycle, which may require more detailed cash flow forecasting and tighter budgeting controls.
Payroll systems must be compliant – Businesses will need payroll software capable of processing and reporting super contributions in real time through Single Touch Payroll. Employers should consult their payroll providers early to confirm system readiness and implementation timelines.
Increased compliance visibility – Because contributions will be reported more frequently, late or missed payments will be easier for the ATO to detect. Penalties under the Superannuation Guarantee Charge regime will continue to apply where obligations are not met.
Clearing house arrangements may change – Some small businesses currently use clearing house services to distribute contributions to multiple funds. Employers should confirm whether their existing arrangements remain appropriate under the new framework.

What employees need to know

More frequent super contributions – Instead of waiting until the end of each quarter, employees should see super contributions deposited shortly after each pay period. This allows for greater visibility and earlier identification of missing payments.
Potential long-term benefit from earlier investment – Receiving contributions sooner means funds are invested earlier, which may enhance long term compounding returns.
Greater transparency – The reform is intended to make super entitlements more secure. Employees should continue to monitor their super accounts regularly to ensure contributions are being received correctly.

Why this reform matters
Unpaid super has been a persistent issue in Australia’s retirement system. By aligning super payments with wage payments, Payday Super aims to strengthen compliance, improve retirement savings outcomes and create a fairer system for workers. While the change increases administrative responsibility for employers, it also provides greater certainty and protection for employees. With the commencement date approaching, both businesses and workers should begin preparing now to ensure a smooth transition to the new requirements.

The ATO’s focusing on small businesses in 2026: are you ready?

Admin 24th February, 2026

The ATO is encouraging small businesses to start 2026 strong by taking proactive steps to avoid compliance issues that could lead to penalties or enforcement action. Don’t forget we’re here to help you get your tax processes running smoothly.

Why this matters now
Small business tax debts have grown to over $50 billion nationally, and the ATO is accelerating efforts to collect unpaid taxes. It warns that many businesses run into avoidable problems simply because they haven’t maintained proper records, reported all income or managed cash flow effectively. Part of the estimated $27.2 billion small business income tax gap stems from these preventable mistakes, making it crucial for business owners to understand the ATO’s focus areas and take corrective action early.

Key areas of concern
The ATO has identified several critical compliance risks that small businesses should address: late lodgments and unpaid tax debts, which can trigger firmer recovery actions; poor cash flow management, particularly failing to set aside funds for GST and PAYG withholding obligations; inadequate record keeping, especially businesses still using the “shoebox of receipts” strategy; unreported income, particularly from cash transactions; and superannuation guarantee obligations, which should especially be top-of-mind with payday super changes coming in July 2026.

Simple steps to stay compliant
The good news is that most compliance issues are preventable with some basic habits. For example:

Set up separate accounts: Keep dedicated bank accounts for GST collections and PAYG withholding. Don’t be tempted to use these funds to boost cash flow, as this creates bigger problems when obligations fall due.
Lodge and pay on time: Mark your calendar for all lodgement deadlines and payment due dates. If you can’t meet a deadline, contact us or the ATO early to discuss options rather than ignoring the problem.
Keep accurate records: Move away from paper-based systems and embrace digital record keeping. The ATO app offers useful features like myDeductions and business performance check tools for sole traders.
Report all income: Ensure you declare all business earnings, including cash payments. The ATO receives data from multiple sources and conducts audits to identify unreported income.
Prepare for payday super: From 1 July 2026, employers must pay superannuation guarantee contributions each payday rather than quarterly. Review your payroll systems now to ensure you’re ready for more frequent payments.

Getting professional help
The ATO strongly recommends engaging a registered tax practitioner who understands your business. That’s where we come in! Above all, avoid relying on informal advice from friends or social media for tax guidance. Professional support can help you navigate complex areas and prevent costly mistakes.

ATO support available
The ATO also provides resources to help small businesses stay compliant, including a record keeping evaluation tool, a cash flow kit with templates and planning tools, online services for checking lodgment status and managing debts, a payday super checklist, and multilingual support through the Translating and Interpreting Service.

Take action now
Don’t wait for problems to escalate. The ATO emphasises that engaging early is always better than dealing with consequences later. Implementing these simple steps and seeking professional advice now means you can focus on growing your business in 2026 rather than worrying about compliance issues. Contact our office to discuss how we can support your business and help ensure you’re meeting all your tax obligations properly.

Time is running out for small business superannuation clearing house users

Admin 10th February, 2026

If you’re one of the thousands of small businesses using the Small Business Superannuation Clearing House (SBSCH), you need to act now. The service will permanently close on 1 July 2026, giving you just five months to transition to an alternative payment method.

What’s happening?
The SBSCH closure is part of the government’s payday super reforms, which aim to modernise how employers pay superannuation. This service has been a lifeline for small businesses, allowing them to make a single payment that gets distributed to all their employees’ super funds. From 1 July 2026, the SBSCH will no longer process payments or allow access to historical records. If you’re currently using the service, you can continue until 11:59 pm AEST on 30 June 2026.

Who can still use the SBSCH?
Until its closure, the SBSCH will only be available to existing registered users with either: 19 or fewer employees; or an annual aggregated turnover of less than $10 million. The service is no longer accepting new registrations, so if you’re not already signed up, you’ll need to find an alternative payment method immediately.

What you need to do now
The ATO recommends making the January to March 2026 quarter your last quarter using the SBSCH. This gives you a buffer to establish your new payment process before the service closes permanently. Your immediate priorities should be: Choose your alternative payment method. Check if your existing payroll software already includes super payment functions. Many modern payroll systems offer integrated superannuation payments that meet SuperStream requirements. Alternatively, you can use commercial clearing houses or online payment services offered by some large super funds.

Download your records before 1 July 2026. This is crucial, because once the service closes, your transaction history and employee details will be permanently inaccessible. You’ll need these records for future audits and employee queries. To download your payment history, navigate to the Payment Instruction tab, select the Historical tab, choose your date range and save the print-friendly version. For employee details, go to the Employees tab, filter your results and print to PDF. Switch early to avoid problems. By transitioning before the deadline, you’ll have an established process in place and reduce the risk of late payments for the April to June 2026 quarter.

Finding alternatives
The ATO’s SuperStream Product register lists certified payroll software and service providers that can handle your super payments. Many of these solutions offer additional features like automated calculations, compliance reporting and integration with your existing accounting systems. Large super funds often provide online payment portals, and commercial clearing houses offer similar services to the SBSCH but with enhanced features and ongoing support.

Don’t wait until the last minute
With the last quarterly super payments due on 28 January and 28 April, you need to have your new system operational well before the SBSCH closes, and before payday super starts. The transition period also allows you to test your new process and resolve any issues before they become urgent.

Get professional help
Choosing the right super payment solution depends on your business size, payroll complexity and existing systems. The transition also presents an opportunity to review your entire payroll and super compliance processes. Contact our office to discuss the best alternatives for your business and ensure a smooth transition that keeps you compliant with your super guarantee obligations.

High income earners – you could be paying an extra 15% tax on your super contributions

Admin 3rd February, 2026

If you earn close to or over $250,000, or receive a large lump sum payment during the year, there’s an additional tax lurking in the background that could unexpectedly impact your superannuation strategy.

What is Division 293 tax?
Division 293 tax is an additional 15% tax that applies to certain superannuation contributions when your income exceeds the high income threshold of $250,000. This tax targets what are called “low tax contributions” – essentially your concessional contributions within your annual limit, such as employer contributions and personal after-tax contributions for which you’ve claimed a tax deduction. When this tax applies, the total tax on these contributions jumps to 30% – comprising the standard 15% contributions tax paid by your super fund, plus the additional 15% Division 293 tax that you pay personally.

How is it calculated?
The Division 293 tax applies to the lesser of: your low tax contributions for the year; and the amount of your income that exceeds $250,000. If your regular income sits below $250,000 but adding your low tax contributions pushes you over the threshold, the extra tax only applies to the portion of contributions that exceed the threshold.

A practical example
Consider Sarah, whose taxable income is $230,000 for 2025–2026. Her low tax contributions total $30,000, bringing her Division 293 income to $260,000. Since this exceeds the $250,000 threshold by $10,000, Sarah’s taxable contributions under Division 293 are $10,000 (the lesser amount). Her additional Division 293 tax bill is $1,500 (15% of $10,000).

What counts as income for Division 293 tax purposes?
The income calculation is broader than your regular taxable income. It includes: taxable income (excluding any First Home Super Saver released amounts); amounts subject to family trust distribution tax; reportable fringe benefits total; total net investment losses (including negative gearing losses and net rental property losses); and your low tax contributions. This comprehensive definition means that common tax reduction strategies like negative gearing and salary sacrificing to super generally won’t help you avoid Division 293 tax. Even though these strategies reduce taxable income, these components are be added back into Division 293 income as net investment losses and low tax contributions.

A few traps to look out for
If you receive a lump sum payment in the year, these payments are included in your taxable income in the year of payment, regardless of which year they actually relate to. This means the taxable amount of a redundancy payment, or payments of unused annual leave or unused long service leave, could unexpectedly push you over the $250,000 threshold in the year you receive them. Sometimes the ATO may disregard or reallocate certain super contributions due to ‘‘special circumstances’’. While this may help you avoid excess concessional contributions tax, the contributions will still count towards the $250,000 threshold in the year they are actually received (although any excess concessional contributions are excluded). The maximum Division 293 tax isn’t necessarily capped at $4,500 (15% of the standard $30,000 concessional contributions cap). If you have unused concessional contribution capacity from previous years under the carry-forward rules, larger contributions could attract proportionally higher Division 293 tax.

Take action
If you’re approaching or exceeding the $250,000 income threshold, it’s crucial to factor Division 293 tax into your superannuation strategy. The timing of contributions, salary sacrifice arrangements and other income decisions all play a role in managing this additional tax burden. Contact our office to discuss how Division 293 tax might affect your situation and explore strategies to optimise your superannuation contributions.

Student loan debts: what you need to know about the latest changes

Admin 28th January, 2026

If you’re among the more than three million Australians with a student loan, there’s welcome news that could significantly lighten your financial load. A major debt reduction has been rolled out, alongside changes to how and when you repay your loan. Understanding these changes could put thousands of dollars back in your pocket and reduce your annual repayments.

The 20% debt reduction explained
The Australian Government’s legislation to reduce student loan debt by 20% is now being applied, with the ATO having commenced processing the reductions. The 20% reduction is applied to your student debt balance as at 1 June 2025, before indexation was applied, with the 2025 indexation recalculated on the reduced debt amount. This means if you had a debt of $27,600 on that date, approximately $5,520 will be wiped from your balance. The reduction applies to all types of student loans, including: HELP loans (including HECS-HELP, FEE-HELP, STARTUP-HELP, SA-HELP and OS-HELP); VET Student Loans; Australian Apprenticeship Support Loans; Student Startup Loans; and other student support loans.

What you need to do
The good news is that you don’t need to take any action. Most people were due to receive their reduction before the end of 2025; however, more complex reductions may not be processed by the ATO until early 2026. The ATO will notify individuals when it has applied the 20% reduction to your loan account, with the notification sent via SMS, email or your myGov inbox. You should continue to lodge your tax returns as usual. There’s no benefit in delaying lodgment, as the reduction is based on your debt balance as at 1 June 2025.

Understanding potential refunds
If your loan account is in credit after the reduction is applied, you may receive a refund. If you have outstanding tax or other Commonwealth debts, the ATO will apply your credit to these debts first. Your refund will then be sent to your nominated bank account, so make sure your bank details are up to date to avoid any delays.

Changes to repayment thresholds
From 1 July 2025, significant changes have been made to how student loan repayments work. The minimum repayment income needed to make a compulsory repayment has increased to $67,000 for the 2025–2026 income year (from $54,435 in 2024–2025). Compulsory repayments have moved to a marginal repayment system, meaning they’re only calculated on the part of your income above $67,000 (instead of your total repayment income). This is a significant change that will reduce annual repayments for most people. For example, someone earning $70,000 will save approximately $1,300 per year in repayments. If your repayment income is $179,286 or more, your compulsory repayment will continue to be 10% of your total repayment income, meaning you won’t be worse off because of the shift to marginal rates.

Tax implications
These changes have important tax implications. If you’re an employee, you may have less tax withheld from your pay towards a compulsory repayment. Any additional amounts already withheld may be refunded to you when you lodge your 2026 tax return, provided you have no outstanding tax or other Commonwealth debts. If you pay tax in instalments, these changes won’t be applied until 1 July 2026. You’ll receive any extra tax you paid in the 2025–2026 income year as a refund in your 2026 tax assessment, if you have no outstanding debts. For more information about how these changes affect your specific situation, speak with your professional tax adviser to understand the full impact on your financial position.

Status update on proposed tax for high super balances

Admin 20th January, 2026

A new tax on the earnings relating to super balances in excess of $3 million has been under development for several years now. While this Div 296 proposal isn’t yet law, there have been some important changes that could significantly impact your retirement planning strategy.

The core proposal
As the proposal now stands, a new two-tier tax will apply to the earnings relating to large super balances from 1 July 2026. Under the proposal, you’ll face a personal tax of 15% on earnings relating to total superannuation balances between $3 million and $10 million, and 25% tax on earnings relating to total superannuation balances above $10 million. That is, the tax will apply to the money you earn from super amounts above the thresholds; it’s not an extra tax on your total balance. Total superannuation balances include assets in both superannuation savings and pensions/annuities. The new tax can be paid from outside super or you can release money from your super fund to pay the tax. Combined with the existing 15% tax that super funds pay on fund earnings, this creates a combined tax rate of up to 30% and 40% on earnings relating to these large super balances. Both thresholds will be indexed to inflation, making the impact of the proposed tax fairer than previous proposals. The most significant improvement is that the tax will now only apply to realised earnings. This means only actual capital gains you’ve made will be caught amongst other earnings. For self-managed superannuation funds (SMSFs), capital gains that built up before 30 June 2026 will be effectively excluded from the Div 296 tax calculation through a separate notional cost base tracking system.

Important changes that could catch you out
A potential loophole has been closed. Previously, the percentage of earnings subject to the tax was based only on the percentage of your total superannuation balance over the threshold at the end of the financial year. Now it’s based on the higher of your balance at the start or end of the year. This change specifically targets people who might realise large gains during a year and then withdraw significant amounts before 30 June to try to avoid the tax. If you’re considering this strategy, you realistically have until 30 June 2027 to extract superannuation. In 2026–2027 only, the percentage will be based on your total super balance at the end of the year only (30 June 2027).

Action required for SMSF capital gains relief
If you have an SMSF and want to take advantage of the capital gains relief for pre-30 June 2026 gains, you must actively opt in using an approved form. This isn’t automatic, and there’s a deadline – you must opt in by the due date of your 2026–2027 tax return. Even if no current members have more than $3 million in superannuation, it might still be worth opting in if you expect any members to exceed $3 million in the future and the fund has already accrued large gains.

How earnings will be split between members
For SMSFs, the method for splitting the fund’s Div 296 earnings between members will be set out in regulations (to be released), but Treasury has indicated this will involve obtaining an actuarial certificate. This means some accumulation funds may need an actuarial certificate for the first time.

What happens next
The consultation period is short, closing on 16 January 2026, indicating the government wants to move quickly with this legislation. When the proposal is legislated, the tax will commence from 1 July 2026.

Time to review your strategy
If you have a large total super balance, these changes require careful consideration of your retirement income strategy. Contact our office to discuss how these changes might affect you and what steps you should take before the new tax commences.

Beware of pump and dump investment schemes

Admin 14th January, 2026

Late 2025 saw a concerning surge in pump and dump schemes targeting Australian investors, with ASIC reporting a notable rise in complaints to the regulator. If you’ve been active in the markets recently, particularly with small-cap stocks, you need to be aware of these increasingly clever scams that could cost you thousands.

What are pump and dump schemes?
Pump and dump operators are unscrupulous actors who artificially inflate share prices through false rumours and misleading information, then sell their own holdings at the peak, leaving unsuspecting investors with worthless shares. These schemes specifically target small-cap securities with low liquidity because even minor announcements can dramatically impact their share prices.

The recent surge
ASIC has reported a notable rise in pump and dump activities targeting Australian investors. International regulators, including New Zealand’s Financial Markets Authority and the United States’ Financial Industry Regulatory Authority, have also issued warnings about similar schemes in their jurisdictions. The sophistication of these operations has reached alarming levels. Criminal gangs are now hacking brokerage accounts to conduct unauthorised trades, exploiting different regulatory regimes in cross-border transactions, using fraudulent celebrity endorsements to build credibility, directing victims to private messaging apps like WhatsApp, and targeting investors through sophisticated social media advertising.

How these scams work
The process typically follows a predictable pattern. Scammers identify thinly traded stocks, then flood social media platforms, online forums and messaging apps with false information designed to create excitement and urgency around the investment. They might use fake celebrity endorsements, paid advertisements that appear high in search results, or coordinate multiple “finfluencer” endorsements to create the illusion of genuine market buzz. Once momentum builds and the share price rises, legitimate traders who watch for small-cap opportunities often join in, further inflating the price. At the peak, the original scammers sell their holdings and disappear, leaving everyone else with rapidly declining shares.

The financial impact
The consequences are severe. ASIC research from 2022 estimated that retail investors were losing $6.3 million per month from potentially pumped events. The FBI has reported a 300% increase in victim complaints about these scams over the past year, affecting both stocks and cryptocurrency assets.

Warning signs to watch for
Several red flags should immediately raise your suspicions: unsolicited marketing creating urgency around specific investments; sudden rushes of commentary about little-known investments across multiple forums; social media advertisements directing you to private chat groups; fake celebrity endorsements or testimonials; strange market behaviour, such as sudden price spikes in typically stable investments; and claims of “inside information” or “guaranteed returns”.

Protecting yourself
Before making any investment decision, especially in small-cap stocks, take time to verify the information independently. Check the company’s official announcements, research its financial position and be particularly wary of investments promoted through social media or unsolicited communications. If you suspect you’ve encountered a pump and dump scheme, report it immediately to Scamwatch, the ATO or ReportCyber. Quick reporting can help protect other investors and assist authorities in their investigations.

Take action now
Given the recent surge in these sophisticated schemes, now is the perfect time to review your investment approach and ensure you have proper safeguards in place. Contact our office to discuss strategies for protecting your portfolio and identifying legitimate investment opportunities in today’s complex market environment.

Lump sum or pension – which super withdrawal option is right for you?

Admin 17th December, 2025

When you reach retirement and can access your super, you face an important decision: should you take your super as a lump sum, set up a regular income stream, or use a combination of both? This choice affects how much tax you pay, how much government age pension you receive and how long your retirement savings last.

Super lump sum withdrawals
Taking a lump sum means withdrawing some or all of your super in one or more payments. Once you take money out as a lump sum, it’s no longer considered super. If you invest that money outside of super rather than spending it, any investment earnings won’t receive the tax benefits that super enjoys and you may need to declare the earnings in your tax return.

Lump sums offer flexibility, but you risk spending too much too quickly and running out of money later in retirement.

Super income streams (pensions or annuities)
A super income stream involves receiving regular payments from your super fund or annuity provider, paid at least annually. You may prefer an income stream because they help manage spending and provide ongoing income throughout retirement.

Some income streams are also better for maximising your government age pension entitlement. The tax advantages can also be significant. When you transfer super into a super income stream, your super fund doesn’t pay tax on investment earnings in that account as long as the income stream operates correctly.

Account-based pensions
An account-based pension is a simple type of super income stream you may use to gradually draw down your super savings. Your super fund continues to invest your money according to your investment choices and adds investment returns (or subtracts losses) to your account.

Your balance fluctuates with market performance, but you benefit from tax-free investment earnings. You must withdraw a minimum amount each year; however, you can withdraw as much as you like above this minimum and also take out lump sum amounts when needed.

There are many different types of income streams available, so it is best to explore the best option for you with your adviser.

Limits on the amount you can transfer to an income stream
A lifetime limit exists on how much you can transfer into tax-free super income streams. This limit is currently $2.0 million if you are starting your first income stream.

Tax treatment differences
If you’re aged 60 or over, payments you receive from an account-based pension are generally tax-free, whether taken as lump sum withdrawals or regular pension payments. Lump sum withdrawals from the accumulation phase of super are also tax-free for over 60s.

The big tax difference applies to your remaining super balance. Investment earnings on your balance in an account-based pension are tax-free, making your retirement savings last longer. However, if you simply leave your remaining super balance in the accumulation phase, investment earnings will be subject to 15% tax in the fund.

Making the right choice
The decision between lump sums and income streams depends on your individual circumstances, including your age, other income sources, whether you qualify for government benefits and how you prefer to manage your money.

Many retirees find that a combination works best – you can take some super as a lump sum for immediate needs while setting up an income stream for ongoing expenses.

It’s worth consulting with your professional tax adviser or financial adviser to discuss your retirement strategy.