Superannuation · Retirement Income •
Can you get an income from your super? How an account based pension works
Once you reach 60 and retire, your super can pay you an income much like a wage. Here’s how an account based pension works — the drawdown rules, the tax, the $2.1m transfer cap, and how Centrelink sees it.
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Short answer: Yes, it's true. Once you reach age 60 and retire, you can convert your super into a regular income that is paid to you much like a wage. The most common way to do this is called an account based pension — you may also hear it called an allocated pension, a retirement income account or a super income stream. Your balance stays invested, you choose how much and how often you are paid, and from age 60 the income is tax free.
- You can absolutely draw an income from your super. An account based pension is the most common way Australians do it, and it is what most people mean when they talk about "getting a pension from super".
- It is not the Age Pension. That is a separate Centrelink payment, and you may be able to receive both.
- You can start one once you reach preservation age — now 60 for everyone — and meet a condition of release.
- The minimum you must withdraw each year starts at 4% and rises with age to 14%. There is no maximum in retirement phase.
- From 1 July 2026 you can transfer up to $2.1 million into retirement phase across your lifetime. This is the general transfer balance cap.
- The balance is not guaranteed to last. It runs until it is exhausted, which makes the drawdown rate and investment mix the two decisions that matter most.
What are your options for getting an income from your super?
There are four ways to turn a super balance into money you can live on. Most retirees end up using a combination. ASIC’s Moneysmart guide sets out the same four routes.
| Option | What it does | Who it suits |
|---|---|---|
| Account based pension | Regular income from your own invested balance, paid until it runs out | Most retirees. The default choice. |
| Transition to retirement pension | Limited income from super while you are still working | Aged 60+, cutting back hours but not fully retired |
| Annuity | Guaranteed income for a fixed term or for life, in exchange for giving up access to the capital | Those who want certainty over flexibility, often for part of the balance |
| Lump sum withdrawals | Ad hoc withdrawals as needed, with no regular schedule | Clearing a debt or funding a one-off cost, rather than as an income strategy |
This article focuses on the account based pension, because it is what the large majority of Australians use and what people are usually referring to when they say they have heard you can get a pension from your super. Whichever route you take, the shift is from holding a balance to producing an income — and those are not the same thing.
"Pension" gets used for two separate payments in Australia, and confusing them causes real planning errors. The Age Pension is a means-tested payment from Centrelink, funded by the government. An account based pension is an income stream funded entirely by your own super balance. They are not alternatives — many retirees receive both, and the size of one directly affects the size of the other.
How does an account based pension actually work?
Think of it as moving money from one super account into another. Your accumulation account — the one your employer has been paying into — is closed or partly commuted, and the balance is transferred into a pension account with the same fund or a different one. If you are still holding several accounts, it is usually worth tidying that up first.
The ATO sets out the mechanics of this conversion. From that point, four things change:
- The money starts flowing out, not in. The fund pays you an income fortnightly, monthly, quarterly or annually, at an amount you nominate.
- The balance stays invested. You choose the investment options, exactly as you did in accumulation. The account keeps rising and falling with markets.
- Earnings become tax free. Investment earnings inside a retirement phase pension are not taxed, compared with 15% in accumulation.
- A minimum withdrawal applies. The government requires a set percentage to be paid out each financial year.
What you have is a bucket of money with a tap on it. You control the tap. Nobody guarantees how long the bucket lasts — that depends on how fast you draw, how the investments perform, and how long you live.
When can you start an account based pension?
You need to have reached your preservation age and met a condition of release. The ATO sets out both.
In practice, preservation age is now 60 for everyone. The ATO still publishes a sliding scale by date of birth, running from 55 for those born before 1 July 1960 up to 60 for anyone born from 1 July 1964. But every earlier cohort has already passed their preservation age, so 60 is the only figure that still bites.
The common conditions of release are:
- Retiring permanently on or after age 60
- Ceasing an employment arrangement on or after age 60
- Turning 65, whether you are working or not
Turning 65 is the clean one. At 65 you have full access to your super regardless of your work situation. Before 65, the fund will ask you to declare your retirement intention, and that declaration matters — it is what gives the pension its tax free status.
If you have reached 60 but are still working and not ready to retire, you cannot start a full retirement phase pension. You can start a transition to retirement pension instead, which works differently. We cover that below.
How much do you have to withdraw each year?
A minimum percentage of your account balance must be paid out each financial year. The percentage is set by your age on 1 July, and it applies for the whole year. The factors below come from the ATO’s published rates and thresholds.
| Your age | Minimum withdrawal | On a $500,000 balance |
|---|---|---|
| Under 65 | 4% | $20,000 |
| 65 to 74 | 5% | $25,000 |
| 75 to 79 | 6% | $30,000 |
| 80 to 84 | 7% | $35,000 |
| 85 to 89 | 9% | $45,000 |
| 90 to 94 | 11% | $55,000 |
| 95 and over | 14% | $70,000 |
There is no maximum in retirement phase. You can withdraw as much as you want, including the entire balance in one go, though drawing heavily early carries obvious consequences.
In the first year the minimum is pro-rated for the number of days remaining in the financial year. If the pension starts on or after 1 June, no minimum applies for that year at all.
Maria is 62 and starts an account based pension on 1 January with $500,000. Her minimum rate is 4%, or $20,000 for a full year. There are 181 days left in the financial year, so her pro-rated minimum is $20,000 × 181 ÷ 365 = $9,918, rounded per her fund's rules. She must receive at least that amount before 30 June.
The minimum drawdown is a compliance floor, not a spending plan. It exists to stop super being used as an estate planning vehicle — not because 4% or 7% is the right amount for you to live on. The more useful question is what the life you want will actually cost, which we have worked through in detail elsewhere. Treating the government minimum as a retirement income strategy is one of the most common mistakes we see, and it works in both directions: some people draw far more than they need and erode the balance, others draw the minimum and live more frugally than they ever had to.
What happens if you don't withdraw the minimum?
This is the consequence almost nobody spells out, and it is severe.
Under the ATO’s minimum pension standards, if your pension does not pay out at least the minimum in a financial year, it is treated as having ceased for income tax purposes from the start of that year. The account loses its retirement phase status, and the investment earnings for the whole year become taxable at 15% rather than tax free.
On a $700,000 balance earning 6%, that is roughly $6,300 in tax on earnings that should have cost nothing — triggered by an administrative oversight.
Two traps worth knowing:
- A lump sum withdrawal does not always count. If an amount is processed as a partial commutation rather than a pension payment, it does not count toward your minimum. The money leaves your account but the requirement is still unmet.
- The rate changes on your birthday year, not your birthday. If you turn 65 in October, your rate steps to 5% from the preceding 1 July, not from October. Payment instructions set and forgotten can quietly fall short.
Check your drawdown every July. It takes ten minutes and it is the single highest-value administrative habit in retirement. For clients on an ongoing advice arrangement, this is one of the things kept under review so it never gets missed.
Do you pay tax on an account based pension?
From age 60, generally no.
| What | Tax treatment from age 60 |
|---|---|
| Income payments to you | Tax free. Not included in your assessable income and not reported in your tax return. |
| Investment earnings inside the account | Tax free, compared with 15% in an accumulation account. |
| Lump sum withdrawals | Tax free. |
| Franking credits | Refundable, because the fund has no tax liability to offset them against. |
That second row is the reason many people start a pension as soon as they are eligible, even if they do not need the income. The earnings tax exemption is worth real money on a meaningful balance, and it applies from the day the pension commences.
Different rules apply if you are under 60, or if your super contains an untaxed element — most commonly from certain public sector schemes. Both are worth checking rather than assuming.
Is there a limit on how much you can transfer?
Yes. The transfer balance cap limits how much you can move into retirement phase across your lifetime.
The general cap increased from $2 million to $2.1 million on 1 July 2026. If you are starting a retirement phase pension for the first time on or after that date, $2.1 million is your personal cap.
If you already had a pension running before 1 July 2026, you get a proportional increase based on how much of your cap you had left unused — not the full $100,000. Someone who had used their entire cap gets no increase at all. Your personal cap is visible in ATO online services through myGov, with the indexed figures displaying from mid-July.
Super above the cap does not have to be withdrawn. It can stay in an accumulation account, where earnings are taxed at 15%. If your total balance is heading toward $3 million, there is a separate tax worth knowing about.
How is an account based pension assessed by Centrelink?
Both tests apply, and Centrelink pays whichever produces the lower Age Pension.
Assets test: the account balance counts as an assessable asset, at its current value.
Income test: the balance is deemed. Under Services Australia’s deeming rules, Centrelink ignores what the account actually earns and what you actually draw, and assumes a set rate of return. Deeming rates moved in March 2026, which is why a lot of people saw their payment fall that quarter.
| Situation | 1.25% applies to | 3.25% applies to |
|---|---|---|
| Single | First $66,800 | Everything above |
| Couple (combined) | First $110,600 | Everything above |
The practical consequence catches people out: drawing less from your pension will not increase your Age Pension. Deeming is based on the balance, not the withdrawal. Reducing your income payments does not reduce your assessed income, and because it leaves a higher balance sitting there, it can actually work against you under the assets test.
If you started an account based pension before 1 January 2015 and were already receiving an income support payment at that time, your pension may be grandfathered from deeming and assessed on actual income instead, using the deductible amount method. This can be significantly more favourable. Critically, the grandfathering is lost the moment you switch funds or restart the pension — so if this applies to you, get advice before consolidating anything.
Can you add money to an account based pension?
No. Once a pension starts, it is closed to further contributions. This surprises almost everyone.
If you want to add money — from selling the family home, an inheritance, a redundancy payment or ongoing work — the process is:
- Make the contribution into an accumulation account
- Commute the existing pension back to accumulation
- Combine the balances
- Start a new pension with the combined amount
It is routine, but it is not automatic, and it has consequences: a new transfer balance credit is recorded, your tax free and taxable proportions are recalculated, and any Centrelink grandfathering is permanently lost. This is the single most common reason people accidentally give up a favourable Centrelink position.
Some retirees avoid the cycle by running two accounts — a pension for income and a small accumulation account for contributions — and consolidating only when it makes sense. Whatever you put back in still has to fit inside the annual limits.
What happens to your account based pension when you die?
The remaining balance is paid as a death benefit. Who receives it, and how much tax they pay, depends on decisions you make now.
The ATO sets out how death benefits are taxed. To a tax dependant — a spouse, a child under 18, or someone financially dependent or in an interdependency relationship — the benefit is paid tax free.
To a non-tax dependant, most commonly an independent adult child, the taxable component is taxed. The taxed element attracts 15%, plus the 2% Medicare levy where the payment goes directly from the fund to the beneficiary. Paid through your estate instead, the Medicare levy does not apply. Any untaxed element attracts 30% plus the levy.
A $600,000 balance that is 85% taxable component, left to two adult children and paid directly by the fund: roughly $510,000 is taxable, taxed at 17%, for about $86,700 in tax. Paid via the estate instead, the same benefit attracts 15% — around $76,500. A difference of about $10,200 from one structural decision.
Two levers reduce this. A reversionary nomination lets the pension continue automatically to your spouse without interruption, which is administratively far simpler than a fresh death benefit claim. And a withdrawal and recontribution strategy, done while you are eligible to contribute, can convert taxable component into tax free component and cut the eventual bill substantially.
Both need to be set up while you are alive and eligible. Neither can be fixed afterwards, which is why the structure is worth getting right early rather than revisiting it in your eighties.
Account based pension vs transition to retirement pension
| Account based pension | Transition to retirement | |
|---|---|---|
| Who can start one | Age 60 and retired, or age 65 | Age 60, still working |
| Minimum drawdown | 4% to 14% by age | Same |
| Maximum drawdown | None | 10% of balance each year |
| Earnings tax | Nil | 15% |
| Lump sums | Permitted | Generally not permitted |
| Counts toward transfer balance cap | Yes | No |
A TTR pension converts automatically into a full retirement phase pension when you turn 65 or notify your fund that you have retired. At that point the 10% ceiling disappears and the earnings exemption begins.
What are the disadvantages of an account based pension?
The honest list:
- It can run out. There is no guarantee the money lasts as long as you do. Longevity risk sits entirely with you, unlike an annuity or the Age Pension. The same balance also stretches very differently from one household to the next, for reasons we have unpacked here.
- Market risk continues. The balance still falls in a downturn, and a poor sequence of returns in the first few years of drawing does disproportionate damage. Withdrawing while markets are down means selling more units to fund the same income — the balance may never fully recover.
- You have to manage it. Investment mix, drawdown rate, cash reserves, annual minimums. It is not set-and-forget, and returns are only part of the picture.
- It reduces your Age Pension. The balance counts under both means tests.
- Costs keep rising. A fixed income payment loses purchasing power over time, which is why the cost of living squeeze lands harder on retirees than most.
- It is inflexible on contributions. Adding money means restarting.
- Death benefits can be taxed. Up to 17% of the taxable component if it goes to adult children.
None of these make it the wrong choice — it remains the right structure for most retirees. But they are the reasons an account based pension works best as part of a plan rather than as the whole plan. Cash reserves, a considered drawdown rate, and in some cases partial annuitisation exist precisely to address these gaps. Building that around your own numbers is what turns a product into a plan, and it is the substance of our superannuation and retirement advice.
Terms you will see on your pension statement
Super paperwork uses language that rarely gets explained. Here is what the common terms actually mean.
| Term | What it means |
|---|---|
| Allocated pension | The old name for an account based pension. Same product. Older statements and pre-2007 documents still use it. |
| Retirement income account | What many super funds call their account based pension product. Also marketed as a pension account or retirement account. |
| Retirement phase | The status your account has once it is paying a genuine pension. This is what makes investment earnings tax free. |
| Accumulation phase | The account you had while working, where contributions go in and earnings are taxed at 15%. |
| Condition of release | The event that unlocks your super — retiring after 60, ceasing employment after 60, or turning 65. |
| Preservation age | The earliest age you can access super. Now 60 for everyone. |
| Commutation | Converting some or all of your pension back into a lump sum. A partial commutation does not count toward your minimum drawdown. |
| Taxable and tax-free components | The two parts of your balance. The split is fixed when the pension starts and applies to every payment after that — this is the proportioning rule. It determines the tax your beneficiaries pay. |
| Exempt current pension income (ECPI) | The tax exemption your fund claims on earnings supporting a retirement phase pension. Lost if you miss the minimum drawdown. |
| Reversionary beneficiary | Someone nominated to have the pension continue automatically to them on your death, rather than the account being paid out as a death benefit. |
| Transfer balance account | The ATO's running record of how much of your lifetime cap you have used. Visible in myGov. |
| Drawdown | The amount you take out. The minimum drawdown is the legislated floor; your drawdown rate is what you actually choose. |
What happens to your Age Pension if you sell the family home?
Your principal home is exempt from the Age Pension assets test. Services Australia defines this as the home you live in plus the first 2 hectares of land it sits on, on a single title. Land beyond 2 hectares, and any part of the home used solely for business, are counted.
Selling changes the position — but not as bluntly as most people assume, and the difference matters:
- Proceeds you intend to put into another home are largely protected. The portion you plan to use to buy, build, rebuild, repair or renovate a new principal home is exempt from the assets test for up to 24 months, extendable by a further 12 months in some circumstances. During that period those proceeds are deemed at the lower rate only.
- Everything else is assessed normally. Any surplus held as a financial asset — including money contributed to super and moved into an account based pension — counts under the assets test and is deemed at the regular rates.
So downsizing and buying again is treated very differently from downsizing and investing the difference. It is the second that carries the Age Pension consequence, and it is worth working through before the house is listed rather than after settlement.
There is also a specific super contribution available to people selling a long-held home, with its own eligibility rules and its own Age Pension effects.
Finding an account based pension adviser in Melbourne
The rules above are federal. Who you take them to is not.
Anyone giving you personal advice on superannuation, investments or life insurance must appear on ASIC's Financial Advisers Register. If they are not listed, they cannot legally give you that advice. The register is free, and you can search it by name, adviser number or ABN — or by suburb or postcode, which is the practical way to see who is authorised near you in Melbourne.
For each adviser it shows where they have worked, their qualifications and training, professional memberships, the product types they are authorised to advise on, and any disciplinary action. ASIC does not endorse or recommend anyone, and it does not verify what licensees submit — so treat it as a licensing check rather than a quality ranking.
Worth doing before you hand over your super statement, whoever you end up seeing.
The rules are the easy part. The harder question is what your balance actually supports, year by year, against your real spending and your Age Pension position — and that takes modelling against your own numbers.
Book a free consultationFrequently asked questions
Can you get an income or a pension from your super?
Yes. Once you reach age 60 and meet a condition of release, you can convert your super into a regular income stream. The most common form is an account based pension, where your balance stays invested and the fund pays you an income at a frequency and amount you choose. From age 60 those payments are tax free. This is separate from the Age Pension, which is a means-tested Centrelink payment, and many retirees receive both.
What are the disadvantages of an account based pension?
The main disadvantages are that the balance can run out during your lifetime, it remains exposed to market falls, it counts under both Age Pension means tests, you cannot add money without restarting it, and the taxable component may be taxed at up to 17% if left to adult children. It also requires ongoing management of the investment mix and drawdown rate.
What happens to an account based pension on death?
The remaining balance is paid as a death benefit. Payments to a tax dependant, such as a spouse or a child under 18, are tax free. Payments to a non-tax dependant, such as an independent adult child, attract 15% tax on the taxed element of the taxable component, plus the 2% Medicare levy where paid directly by the fund. A reversionary nomination allows the pension to continue automatically to a spouse.
Do you pay tax on an account based pension?
From age 60, income payments from a retirement phase account based pension are tax free and are not included in your assessable income. Investment earnings inside the account are also tax free, compared with 15% in an accumulation account. Different rules apply if you are under 60 or if your benefit includes an untaxed element.
How much can you have in an account based pension?
The general transfer balance cap is $2.1 million from 1 July 2026. If you start a retirement phase pension for the first time on or after that date, that is your personal cap. If you already had a pension running, your personal cap is between $1.6 million and $2.1 million depending on how much of your cap you had previously used.
Can you add money to an account based pension?
No. Once an account based pension has commenced, no further contributions can be made to it. To add money you must contribute to an accumulation account, commute the existing pension back to accumulation, combine the balances and start a new pension. This creates a new transfer balance credit and ends any Centrelink grandfathering.
How much income will an account based pension give me?
There is no fixed amount. You choose your income within the rules, subject to the annual minimum drawdown for your age. As a rough guide, a $500,000 balance drawn at 5% produces $25,000 a year before any Age Pension. What is sustainable depends on your investment mix, fees, how long you need the income to last, and whether you also qualify for the Age Pension.
How long will an account based pension last?
Until the balance runs out. How long that takes depends on your starting balance, your drawdown rate, investment returns and fees. Drawing the minimum will generally make the money last longer than drawing a fixed dollar amount, because the minimum falls with your balance. There is no guarantee it lasts for life, which is the main structural difference between an account based pension and a lifetime annuity.
Am I eligible for an account based pension?
You are eligible if you have reached preservation age, now 60 for everyone, and met a condition of release. The common conditions are retiring permanently on or after 60, ceasing an employment arrangement on or after 60, or turning 65 whether you are working or not. If you are 60 but still working and not ready to retire, you may be eligible for a transition to retirement pension instead.
What fees do you pay on an account based pension?
Most funds charge a combination of an administration fee, an investment fee based on your chosen options, and in some cases a percentage-based account fee. Fees are deducted from your balance, so they directly shorten how long the money lasts. On a $500,000 balance, a difference of 0.5% a year is $2,500 annually. Compare the total cost, not just the headline administration fee.
Manny is a Melbourne-based financial adviser specialising in superannuation, retirement planning and Centrelink strategy for Australians in their 50s and 60s. Over more than 17 years and a thousand retirement plans, he’s found that what people want isn’t a bigger number — it’s the confidence that they’ll be okay. He works with clients across Melbourne’s northern suburbs from Plan My Wealth’s Bundoora office, and Australia-wide by video.
+61 433 564 003 · manny@planmywealth.com.au · Book a free consultation
Sources & how we checked this
Every figure was checked against its primary Australian government source and is current for the 2026–27 financial year (verified July 2026). Key sources are also linked once, inline, beside the section they support.
- ASIC Moneysmart — Account based pensions (how they work, income options)
- Australian Taxation Office — Super income streams (minimum drawdown, tax, transfer balance cap)
- Services Australia — Age Pension income and assets tests (Centrelink assessment)
