Millions of retirees are paying super tax they could avoid

October 31, 2026 — 5:01am

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If you’re over 65 and have your money sitting in an ordinary superannuation account, there’s something you should check this weekend. You might be paying tax on your super’s investment earnings, that you no longer need to pay. And you most certainly wouldn’t be alone in doing so.

Research from super fund HESTA estimates that 1.8 million Australians who could have moved their super into a retirement phase account haven’t done so. Collectively, they could be missing out on about $2.5 billion a year in potential tax savings forgone – just in one year.

That’s an awful lot of money we’re giving to the government unnecessarily.

Let me explain. While you’re building your super, in the “accumulation phase”, your investment earnings are taxed at up to 15 per cent, and your capital gains at up to 10 per cent.

But, once you meet the eligibility criteria, you can move your money into a “retirement phase” account where you receive an income from that super, and your investment earnings and capital gains are generally tax-free, up to certain limits.

There’s a catch, of course. Once you move your money into a retirement phase account, you must start to draw out a minimum percentage of your balance every year. And the percentage you have to draw down increases as you get older, effectively requiring you to draw down your savings rather than leave them untouched inside your super fund throughout retirement.

I’m very wary of giving super funds the power to automatically move members into its own retirement products without significant scrutiny.

For someone aged 65 to 75, the mandatory minimum drawdown is 5 per cent of the account balance, so if you moved $200,000 into a retirement account, you’d need to withdraw at least $10,000 in the first year.

For many people, particularly those who’ve stopped working and rely on some form of age pension, moving into a retirement account can make good........

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