For many Australians running a self-managed super fund, turning 60 is the moment the tax rules quietly change in their favour. It is the age at which preservation ends for everyone, the age at which several conditions of release become straightforward, and the age from which pension payments from a taxed SMSF are received tax-free. Just as importantly, once a fund starts paying a retirement-phase pension, the Earnings on the Assets backing that pension stop being taxed at 15 per cent and become exempt from tax altogether. Understanding how these pieces fit together helps explain why the age-60 pivot is one of the most significant milestones in Australian superannuation.

 

Preservation age is now 60 for everyone

Preservation age is the age at which you can generally begin to access your super, provided you also satisfy a condition of release. After a long phased increase, that age is now 60 for every Australian. Anyone born on or after 1 July 1964 has a preservation age of 60, and the final cohort reached that age by 1 July 2024. In practical terms, the old distinction between different birth-year preservation ages no longer matters for people approaching retirement today.

Reaching preservation age alone does not automatically unlock super. It is the combination of age and an accepted condition of release that allows an SMSF to move money from the accumulation phase into the retirement phase.

 

Conditions of release around age 60

Several common conditions of release cluster around age 60. A member who has reached 60 and permanently retires can access their super. So can a member who ceases an employment arrangement on or after age 60 — even if they later take up different work — because ending that particular employment after 60 is itself a condition of release with no cashing restriction. At age 65, super becomes accessible regardless of work status, so a member can start an account-based pension while still working full-time.

For SMSF trustees, meeting a condition of release is what allows the fund to commence a genuine retirement-phase income stream rather than a restricted transition-to-retirement arrangement.

 

Starting a retirement-phase pension

Once a member satisfies the right condition of release, the SMSF can commence an account-based pension. This involves the trustees documenting the pension, setting the starting balance, and beginning regular payments that meet the minimum drawdown rules. From that point, the assets supporting the pension are treated as being in the retirement phase.

There is an important limit on how much can be moved into this phase. The general transfer balance cap was $2 million in 2025–26 and was indexed to $2.1 million from 1 July 2026. This cap limits how much each person can transfer into the tax-free retirement phase across all of their superannuation, not just within one SMSF. Someone who first started a retirement-phase pension in an earlier year may have a lower personal cap because of proportional indexation, so only those who had never previously commenced a retirement-phase income stream receive the full $2.1 million.

 

Pension payments become tax-free from 60

The headline benefit of the age-60 pivot is at the member level. Pension payments made to a member aged 60 or over from a taxed SMSF are tax-free. They are not included in the member’s assessable income, and there is no need to declare them in a tax return. This is a marked contrast with the position for a member under 60, where the taxable component of a pension is generally taxed at marginal rates with a 15 per cent tax offset.

 

Fund earnings drop from 15 per cent to zero

The second benefit sits inside the fund. In the accumulation phase, an SMSF pays 15 per cent tax on its Investment earnings, with an effective rate of around 10 per cent on discounted capital gains from assets held longer than 12 months. Once assets support a retirement-phase pension, the income and capital gains they generate become Exempt Current Pension Income (ECPI), taxed at 0 per cent.

For funds holding fully franked Australian shares, this can be particularly valuable. Franking credits attached to dividends can offset tax, and in the retirement phase — where the tax rate is zero — excess franking credits are generally refundable, which can mean a full cash refund.

 

A hypothetical illustration

Consider a hypothetical example for illustration only. Frank, aged 61, has recently retired and moves $900,000 within his SMSF from accumulation into a new account-based pension. The pension payments he draws each year are tax-free in his hands because he is over 60. Meanwhile, the $900,000 of assets backing the pension now generate earnings that are exempt from tax, rather than being taxed at 15 per cent as they were while in accumulation. This example is a general illustration, not a projection, and every fund’s circumstances differ.

 

What SMSF trustees need to know

The tax advantages of retirement phase depend on getting the mechanics right. Trustees must ensure at least the minimum annual pension is paid — 4 per cent of the 1 July balance for members under 65, rising with age. Failing to pay the minimum in a year can mean the pension is treated as not being in retirement phase for the whole year, so the fund loses the 0 per cent exemption and earnings are taxed at 15 per cent instead. Trustees also need to report the commencement of a retirement-phase pension to the ATO and stay within their personal transfer balance cap.

 

Key Takeaway

Turning 60 changes the SMSF tax landscape in two ways: pension payments from a taxed fund become tax-free to members from age 60, and earnings on assets supporting a retirement-phase pension move from 15 per cent to 0 per cent. Accessing these benefits requires meeting a condition of release, commencing a compliant pension, staying within the transfer balance cap (now $2.1 million) and meeting minimum drawdown rules.