The Urgent Check Retirees Need to Make That Could Save Them Thousands
After a lifetime of working hard and building your nest egg, your super should be supporting you, without the burden of also supporting the tax office! However, new data from the Super Members Council (SMC) reveals that around 700,000 Australians over 65 are still paying 15% tax on the investment earnings within their super, when they could be enjoying tax-free earnings.
It’s a small technicality that can have a big impact on your retirement income and it all comes down to one easily missed step.
Why retirees are still paying tax when they don’t have to
When you retire, your super doesn’t automatically switch into “retirement mode.” Until you tell your super fund you’ve officially retired, your savings remain in what’s called the accumulation phase, where investment earnings are taxed at 15%.
Once you notify your fund, you can move your balance into the pension phase, where retirees can enjoy tax-free investment earnings. On average, those who remain in accumulation pay around $650 more in tax each year than they need to - this figure only increases as your balance increases as well.
The challenge is that many people simply don’t realise they need to make this change.
More Australians will continue to pay unnecessary tax as the number of retirees grows rapidly, so it’s crucial to check in so that you’re not losing money!
You don’t need to be 65 to move to the pension phase
Many people assume you need to reach age 65 before you can transition your super into the pension phase, but that’s not always the case. What matters is whether you’ve met what’s called a “condition of release.”
You can generally access your super and begin the pension phase when:
You’ve reached age 65, regardless of your work status
You’re aged between 60 and 65 and have stopped working
You become permanently disabled (at any age)
If you’re unsure about whether you’ve met a condition of release, it’s worth checking with your adviser so that your super is structured in the best way for you.
Why some retirees stay in taxed accumulation accounts
The SMC’s analysis also sheds light on why so many people remain in accumulation accounts after retiring.
In some cases, it’s an active choice because the accumulation phase provides retirees with:
The capability to make extra contributions if they return to work or want to top up their super
The avoidance of mandatory drawdowns, since pension accounts require retirees to withdraw a minimum percentage each year
The preservation of insurance cover, which may not be available once they move into the pension phase
Greater control over lump-sum withdrawals or a buffer for unexpected expenses
The ability to manage balance limits, since any amount over the government’s Transfer Balance Cap must stay in accumulation
Centrelink benefits if under the age of 65
While it may be appropriate to stay in the accumulation phase in some situations, many remain there because they’re unaware of the tax benefits of switching to the pension phase.
Real examples that show why the right structure matters
Margaret, who was 74 years old, and her husband James*, who was 75, came to us as Margaret wanted to make sure everything was set for her to retire. James had already retired and moved his super into the pension phase. Margaret’s total balance was around $1.2 million, all of it was still in the accumulation phase. Because she had been eligible to enter the pension phase from age 65, she could have transferred a large portion of her savings earlier and saved roughly $6,000 each year in tax. Unfortunately, in this case, a simple change could have made a meaningful difference.**
In another situation, married couple Glenn and Suzanne* retired at 60. Although they each met a condition of release, switching to the pension phase immediately was not in their best interest. By keeping some assets in accumulation, we were able to legally shelter assets for Centrelink assessment. This meant that Glenn could receive about $23,000 each year in Age Pension benefits for the next seven years. In this case, staying in the accumulation phase was a big advantage.**
*Disclaimer: The names and identifying details in this article have been changed to protect confidentiality. However, the events and scenarios described are based on real experiences.**Disclaimer: The advice, strategies, and figures presented in the following case studies are specific to the client’s individual circumstances and objectives. They are provided for illustrative purposes only and should not be relied upon as guidance for your own situation. Before making any financial or strategic decisions, you should seek professional advice tailored to your personal circumstances.What this means for you
If you’re a retiree or planning your retirement, it’s always worth seeing what phase your super is in and whether a change is right for you.
At White Rabbit Advisory, we help clients make these decisions with clarity and confidence. A quick review could save you unnecessary tax and help your hard-earned retirement savings last longer!
It all starts with a single conversation. Get in contact with us below and take the step towards the retirement structure perfect for you.
White Rabbit Advisory Pty Ltd is a registered tax (financial) adviser and any reference to tax advice contained in this document is incidental to the general financial advice it may contain. You should seek specialist advice from a tax professional to confirm the impact of this advice on your overall tax position. You should obtain advice relevant to your circumstances before making financial decisions. Whilst every care has been taken in the preparation of this information, it may not remain current after the date of publication and White Rabbit Advisory Pty Ltd and its related bodies make no representation as to its accuracy or completeness. Published: November 2025 © Copyright 2025
Nicola Beswick is an Authorised Representative (No. 459008) and White Rabbit Advisory Pty Ltd (ABN 54 676 177 138) is a Corporate Authorised Representative of Personal Financial Services Limited (PFS) (ABN 26 098 725 145) AFS Licence No. 234459.
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