How super drawdown works in Australia
Once you turn 60 and meet a condition of release, your account-based pension can be drawn down completely tax-free — both the withdrawals you take and the earnings inside the pension. The trade-off is the minimum drawdown rule: the ATO requires you to take a minimum percentage of your balance each year, increasing with age (4% under 65, rising to 14% at 95+). This stops super being used as a tax-free inheritance shelter. There's no maximum — you can draw as much as you need.
Super Drawdown Sustainability Table (Australia)
To help you plan, the table below shows estimated lifespans for different superannuation balances at various target net incomes. These figures assume you start your account-based pension at age 65, select single status, and exclude the Age Pension. Calculations assume 5.0% investment growth, 2.5% inflation, and 0.5% annual fees (a net real return of 2.0%). Super pension withdrawals are entirely tax-free from age 60.
| Target Net Income | $200,000 Pot | $300,000 Pot | $500,000 Pot | $800,000 Pot | $1,500,000 Pot |
|---|---|---|---|---|---|
| $15,000/yr | 15 yrs (age 80) | 24 yrs (age 89) | 40+ yrs (105+) | 40+ yrs (105+) | 40+ yrs (105+) |
| $20,000/yr | 10 yrs (age 75) | 17 yrs (age 82) | 33 yrs (age 98) | 40+ yrs (105+) | 40+ yrs (105+) |
| $30,000/yr | 7 yrs (age 72) | 10 yrs (age 75) | 19 yrs (age 84) | 36 yrs (age 101) | 40+ yrs (105+) |
| $40,000/yr | 5 yrs (age 70) | 8 yrs (age 73) | 14 yrs (age 79) | 24 yrs (age 89) | 40+ yrs (105+) |
| $50,000/yr | 4 yrs (age 69) | 6 yrs (age 71) | 10 yrs (age 75) | 18 yrs (age 83) | 40+ yrs (105+) |
| $75,000/yr | 2 yrs (age 67) | 4 yrs (age 69) | 7 yrs (age 72) | 11 yrs (age 76) | 24 yrs (age 89) |
Case Study: Decumulating a $500,000 Australian Superannuation Pot
Let's look at a case study of a retiree, David, who starts drawing income at age 65 with a $500,000 superannuation pot. His target net income is $30,000 a year (in today's money), rising with inflation.
Year 1 to 2: Drawing Tax-Free Income (Before Age Pension)
Because David is 65, all withdrawals from his account-based super pension are completely tax-free. He does not pay any income tax on these payments, nor does he have to declare them on his tax return. To get $30,000 net, he makes a gross withdrawal of exactly $30,000. The ATO's minimum drawdown rate at age 65 is 4%, which requires a minimum withdrawal of $20,000. David's $30,000 withdrawal satisfies this minimum requirement.
Year 3 onwards: Age Pension Kicks In
At age 67, David becomes eligible for the Age Pension. Assuming he is a single homeowner and holds $10,000 in personal assets outside super, he qualifies for a part Age Pension under the assets test, receiving $20,000 a year (inflation-adjusted):
- To meet his $30,000 net income target, David now only needs to draw a net amount of $10,000 from his super pot.
- This reduces the strain on his super pot dramatically, allowing the remaining capital to grow net of fees and outlast his planning age.
Understanding the Australian Superannuation Tax Structure
Australia’s superannuation system offers one of the most tax-advantageous retirement decumulation environments in the world once you reach age 60:
- 1. Tax-Free Account-Based Pension (Age 60+): From age 60, both income withdrawals and investment earnings inside an account-based pension are 100% tax-free.
- 2. ATO Minimum Drawdown Rates: You must withdraw a minimum percentage annually based on your age (e.g. 4% under 65, 5% for ages 65–74, 6% for 75–79).
- 3. Government Age Pension: Accessible at age 67. Subject to Centrelink income and assets tests, providing an indexed floor that significantly reduces reliance on private super in later years.