Five ways to boost your retirement income

Australia’s super system was designed to provide retirees with regular income in retirement, alongside other support, such as the government Age Pension. 

Your eligibility for the Age Pension depends on conditions such as your age, residency, and the level of your income and assets. 

Super funds generally report the value of any income streams you receive from your super fund, such as an account-based pension to Centrelink twice a year, in February and August. However you can also re-report the balance of your account-based pension more frequently if markets are volatile and your account balance has fallen in value.  

The government sets deeming rates to calculate your assessable income based on the value of your financial assets, so if markets have fallen, you may be deemed to have less assessable income. So, regardless of whether your Age Pension entitlement is calculated based on the assets or income test, re-reporting your account-based pension balance could allow you to qualify for more Age Pension.

To re-report the balance of your account-based pension, access your Centrelink statement online via FirstNet, or book an appointment, to speak with our guidance team.

How you access the money in your super fund will affect how much tax you pay and how much you have left over to generate income in retirement.

While any benefits you receive from your super fund in the form of a lump sum or income stream after you have reached age 60 and retired are generally tax free, tax can still apply to the investment earnings on your super savings depending on how you access your benefits.

For example, a common mistake many retirees make is to leave their benefits in the taxed accumulation phase after they retire instead of transferring their super account balance to start a super pension, such as an account-based pension. While the pension payments you will receive will also be tax free, the big difference is the investment earnings you receive on the balance of your account-based pension will be tax free, instead of taxed at rates of up to 15%. This means your account-based pension would generally get a higher return and therefore last longer. 

It’s also important to consider how much you should draw down from an account-based pension. While many people draw too little, you also don’t want to draw too much, as it can shorten how long your pension will last. It could also result in you paying more tax if you don’t spend all your pension payments and you end up with large amounts invested outside super.

For advice on using your super to commence an income stream to replace your salary or wages after you retire and on appropriate drawdown rates, please speak to your financial adviser. 

If you have an account-based pension or other super income stream, you may need to withdraw a minimum amount, known as the minimum drawdown rate, by the end of each financial year.

You may choose to withdraw more than the minimum drawdown amount. You can also elect to make a lump sum withdrawal from your pension account – but be aware this won’t necessarily count towards your minimum pension payment this financial year.

If you are receiving an account-based pension with a taxable component, you may be able to re-contribute unspent pension payments back into a separate super account as a non-concessional contribution, if you are eligible. This converts any taxable component included in your pension payments into a tax-free component. 

Tax-free components of your super are able to be passed on without tax after you pass away. Taxable components attract at least 15% tax when paid directly to beneficiaries that are not tax dependants (including adult children).

There may also be tax benefits from contributing your withdrawal to your spouse’s account. For example, it could help maximise the amount you are both able to transfer to start a tax free account based pension after you retire by ensuring each of you fully utilise your transfer balance cap (currently $1.9m in 2024-25). 

If you have reached Age Pension age or claim a government allowance, you might also be eligible for the seniors and pensioners tax offset (SAPTO), which allows you to earn more, but pay less tax. 

For singles, the maximum tax offset you are eligible to receive is $2,230. This reduces by 12.5 cents for every dollar your rebate income exceeds $34,919, and phases out completely at $52,759. 

Members of a couple can receive SAPTO where their own rebate income is below the threshold, and 50% of the couple’s combined income is less than the threshold level. If you have an unused part of an offset, you may be allowed to transfer it to your partner. 

However, you’ll need to meet certain conditions depending on:  

• Your eligibility for an Australian Government pension or allowance.

• Your and your spouse's income. 

   

For detailed information about SAPTO, visit the Australian Tax Office website.  

If you’re considering downsizing your home, and you still have a super account, you may be able to contribute up to $300,000 of the proceeds from the sale into your super – that’s per person, so it’s $600,000 if you’re part of a couple. 

A downsizer contribution is tax-free when you deposit it into your super, and you can also withdraw it tax-free later on, but it’s not tax-deductible. 

While you must be 55 or over, there is no upper age limit for making a downsizer contribution – although other rules apply, such as the requirement that you have owned your home for at least 10 years.

You also need to complete the ATO’s Downsizer contribution into super form and submit this to your super fund before or with your contribution. 

If you would like more help with your retirement strategy, book a free consultation with our guidance team.