Drawing down your super?

By Graeme Colley
Executive Manager, SMSF Technical and Private Wealth - SuperConcepts Sydney, Australia

All super benefits are the same, right? Not so fast. Super can be paid as lump sums or pensions, for different reasons and paid in cash or by transferring the fund’s investments to you. Before you start drawing your super there’s a few things to understand how it can be done without breaching the rules.

To draw down your super benefit from an SMSF you’ll need to meet a condition of release, so you can take your super as a lump sum and/or a pension. It’s not compulsory for you to take your super for most conditions of release but it becomes available when you wish to get access to it. On your death it’s compulsory for your super to be paid to your dependants and/or to your estate depending on who you would like to receive it.

There are some conditions of release which limit the type of benefit to just lump sums or only a pension. The most common conditions of release are activated once you ‘retire’ after reaching your preservation age (currently age 57), once you are 65 and on your death. For you to be considered retired, different rules apply depending on whether you are between your preservation age and age 60, and from 60 until you reach 65. Once you reach your preservation age, you have retired if you have ceased employment and intend at that time not to return to work for more than 10 hours each week. Once you reach 60, you are retired if you have ceased any employment, but this does not prevent you from continuing other work or commencing a new job should you choose.

If you decide to withdraw your super as a lump sum, there are two ways in which it can happen.

1. Your lump sum can be paid to you or to your death benefit recipients as cash or as a transfer of the fund’s investments equal to the value of your entitlement. Your benefit could also be paid as a combination of cash and investments.

2. If you chose to commence an income stream from super, then you can receive an account-based income steam or a transition to retirement income stream (TRIS). The income streams must be paid in cash and are subject to a minimum amount. A TRIS, which can commence from the time you meet preservation age, has a maximum amount that you can draw in addition to the minimum. The maximum applies until you have retired or reached 65, whichever occurs first. All income stream payments must be paid in cash unless you elect to convert them in part or full to a lump sum. The value of the lump sum can be paid as cash or by transfer of the fund’s investments.

On your death your superannuation benefits can be paid to your dependants as a lump sum or pension. However, if your death benefit is paid to your adult children, as a rule, it must be made as a lump sum, however, in very limited circumstances it can be paid to them as an income stream. If your death benefit is to be paid to your estate then it must be made as a lump sum and distributed by your executor as instructed in your last will and testament.

Other conditions of release for the payment of your superannuation can include payment to someone who is suffering a terminal medical condition, total and permanent incapacity or temporary incapacity. If you are experiencing temporary incapacity your benefit must be paid as an income stream and limited to the period of your incapacity which is like a salary continuance benefit from an insurance company. However, in the other two situations, your super can be paid to you as a lump sum or an income stream depending on what may provide the best result for you.

Superannuation can also be paid to you in financial hardship or if you satisfy the release on compassionate grounds. There are special conditions which you will need to meet for the payment to be made and there may be limits to the amount you can access.

There are also conditions of release which allow you to withdraw amounts as lump sums if you have exceeded your concessional and non-concessional contributions caps, any excess amounts you have transferred to retirement phase as well as any interest penalties relating to the excess. In these situations, the ATO will notify you of what needs to be done to get the release of the amount.

There are over 20 situations where you can access your superannuation legally. These all depend on your situation as well as the amount you wish to access and whether you are seeking payment of a lump sum or income stream. Make sure any drawdown is within the rules because accessing it in breach may end up in penalty taxes on the amount accessed illegally and you may be fined personally or even disqualified as trustee.

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Important notes

While every care has been taken in the preparation of this article, AMP Capital Investors Limited (ABN 59 001 777 591, AFSL 232497) and AMP Capital Funds Management Limited (ABN 15 159 557 721, AFSL 426455)  (AMP Capital) makes no representations or warranties as to the accuracy or completeness of any statement in it including, without limitation, any forecasts. Past performance is not a reliable indicator of future performance. This article has been prepared for the purpose of providing general information, without taking account of any particular investor’s objectives, financial situation or needs. An investor should, before making any investment decisions, consider the appropriateness of the information in this article, and seek professional advice, having regard to the investor’s objectives, financial situation and needs. This article is solely for the use of the party to whom it is provided and must not be provided to any other person or entity without the express written consent of AMP Capital.


This article is not intended for distribution or use in any jurisdiction where it would be contrary to applicable laws, regulations or directives and does not constitute a recommendation, offer, solicitation or invitation to invest.

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