Turning 60? Stop Paying 15% Tax. Move Your Super to an 'Account-Based Pension' Now 2026

⚠️ 2026 Retiree Tax Alert: Are you over 60 and retired, but leaving your money in a standard "Accumulation" Super account? You are voluntarily donating money to the ATO. In the accumulation phase, your fund pays 15% tax on earnings. By simply submitting a "Commence Pension" form to switch to "Pension Phase," that tax rate drops to 0% instantly.

🇦🇺 The Magic of "Pension Phase"

Superannuation has two distinct lives. First is the Accumulation Phase (while you work), where you grow your wealth. Second is the Pension Phase (when you retire), where you consume it.

An Account-Based Pension (ABP) is an income stream purchased with your Super money. It is widely considered the "Holy Grail" of the Australian tax system.

The Benefit: Once in Pension Phase, investment earnings are tax-free. Capital gains are tax-free. And if you are over 60, withdrawals are also tax-free. It is effectively a legal tax haven.

15% Tax vs. 0% Tax

Turning 60? Stop Paying 15% Tax.

Let's assume you have $500,000 in Super, earning a conservative 5% ($25,000) return per year.

Scenario	Accumulation Phase (Standard)	Account-Based Pension (Retired)
Investment Return	$25,000	$25,000
Tax on Earnings	-$3,750 (15%)	$0 (Tax-Free)
Net Profit	$21,250	$25,000

By failing to switch, you are losing nearly $4,000 a year for no reason. Over a 20-year retirement, that is $80,000+ lost to unnecessary taxes.

Mandatory Withdrawals

In exchange for tax-free status, the government requires you to withdraw a minimum percentage of your balance each financial year.

• 👉 Age 60-64: 4% minimum
• 👉 Age 65-74: 5% minimum
• 👉 Age 75-79: 6% minimum
• 👉 Age 95+: 14% minimum

Strategy: If you don't need the cash for living expenses, withdraw the minimum to satisfy the ATO, then re-invest it outside Super (or pay off debt). Just get the capital out of the taxable Accumulation environment.

Chief Editor’s Verdict

There is a limit to this generosity. As of 2026 (due to indexation), the Transfer Balance Cap (TBC) is effectively $2.0 Million. You can only move up to this amount into the tax-free pension phase. Any excess must remain in Accumulation, where earnings continue to be taxed at 15%.

Action Plan
1. Confirm you have met a "Condition of Release" (e.g., turning 65, or ceasing an employment arrangement after 60).
2. Contact your Super fund and request the "Commence Pension" paperwork.
3. Ensure you do not exceed your personal Transfer Balance Cap.

[General Advice Warning]
The information in this article is General Advice only and does not take into account your personal objectives, financial situation, or needs. The Transfer Balance Cap ($2.0M estimated for 2026) and minimum drawdown rates are subject to ATO regulation changes. The author is not a licensed financial adviser. Always read the relevant Product Disclosure Statement (PDS) and seek professional advice before making decisions about your retirement savings.