Navigating Superannuation at Retirement
Superannuation remains one of the most tax-effective vehicles available to Australians for funding retirement. However, as clients approach and enter retirement, the focus inevitably shifts—from “How much will I have?” to “How should I manage it?” and “What decisions need careful consideration to avoid adverse outcomes?”
This article addresses frequently asked questions encountered during the retirement phase. It touches on how super interacts with estate planning, aged care, and other financial decisions. The following information is general in nature and does not constitute personal advice.
Can You Use Super to Help Children Buy a Home?
This is a common question—and a potentially risky one. In short: not directly.
Superannuation is preserved for retirement purposes. Unless a person has met a condition of release (e.g. reaching preservation age and retiring, or turning 65), super funds cannot be accessed. There is no provision in law to allow early access to help adult children purchase property.
If a condition of release has been met, a retiree may legally withdraw funds from their super account. These funds can then be used at their discretion, including gifting to a child. However, it's important to understand the implications:
Australia has no formal gift tax, but Centrelink deprivation rules apply. Gifts over $10,000 in a financial year or $30,000 over five years can reduce Age Pension entitlements.
Gifting may also have unintended consequences for estate planning, future care costs, or personal financial security.
Alternative ways retirees may assist without drawing from super include:
Acting as a guarantor on a home loan (note: this carries risk and should only be considered after seeking legal and financial advice)
Covering upfront costs (e.g., stamp duty or lender's mortgage insurance) using personal, non-super funds
Providing a formal loan agreement with safeguards
All strategies carry potential financial and legal implications and should be carefully assessed, ideally with professional advice.
What If You Don’t Need All Your Pension Income?
Upon commencing an account-based pension from super, a minimum annual drawdown is required under legislation. However, retirees often find the minimum drawdown exceeds their actual spending needs.
Where eligibility conditions are met, it may be possible to recontribute surplus pension income back into super. This involves:
Receiving the pension income into a personal bank account
Making a personal contribution back into super (accumulation phase)
Commencing a new pension (or "refreshing" the existing one)
This can be beneficial for estate planning and tax purposes but is subject to strict rules and contribution caps. For example:
You must meet age and work test requirements (or use contribution pathways such as downsizer contributions, where eligible)
Total Superannuation Balance (TSB) thresholds may limit your ability to contribute
Transfers back to pension phase must comply with the Transfer Balance Cap
Due to the complexity of this strategy, advice should be obtained, and all actions should be well-documented.
Reversionary Pensions and Estate Planning
Superannuation does not automatically form part of your estate. It's held in trust and is generally distributed according to trustee discretion—unless binding nominations or reversionary arrangements are in place.
A reversionary pension is a valuable estate planning tool. It allows an income stream to automatically continue to a nominated dependant (typically a spouse) upon the original member’s death.
Benefits include:
No disruption to income payments
Continuity of investment structure
Simpler administration
However, reversionary pensions also count towards the recipient’s Transfer Balance Cap, which could impact their ability to hold other pensions or tax-exempt balances.
Important: Reversionary nominations are binding on the trustee and cannot be overridden by a Will. Careful planning is necessary to avoid unintended outcomes.
Binding vs Non-Binding Nominations
Super fund members can generally choose how they want their death benefit distributed by nominating beneficiaries. These nominations fall into three categories:
Binding nominations: Legally enforceable; trustee must follow instructions
Non-binding nominations: Trustee has discretion but considers the nomination
No nomination: Trustee distributes based on the trust deed and relevant law
A valid binding death benefit nomination provides certainty, particularly in blended families or complex estates. Nominations should be reviewed regularly and updated as personal circumstances change.
Pay Off the Mortgage or Keep Growing Super?
This is a classic retirement dilemma.
Should a retiree withdraw from super to pay off the mortgage or continue investing and use surplus income to service the debt?
There’s no universally “correct” answer. The decision depends on:
Cash flow and lifestyle needs
Risk tolerance
Tax considerations (e.g., tax-free pension income vs. taxable investment returns)
Emotional comfort with debt
For some, the peace of mind of being debt-free outweighs any investment upside. Others may prioritise liquidity and longer-term wealth accumulation.
Options may include:
Downsizing the home and contributing proceeds to super (via the Downsizer Contribution)
Maintaining the mortgage and increasing salary sacrifice to boost super
Using a Transition to Retirement strategy (if still working and eligible)
A financial adviser can assist with modelling both approaches to guide decision-making.
Downsizer vs Non-Concessional Contributions
When selling a home, retirees often ask whether they should use a downsizer contribution or a non-concessional contribution (NCC) to add funds to super.
Both are legitimate contribution methods, but downsizer contributions offer key benefits:
No age limit (available from age 55)
No requirement to meet the work test
Not counted toward the standard NCC cap
Can be used even if your TSB exceeds $1.9 million
However, strict timing and eligibility conditions apply. Downsizer contributions must generally be made within 90 days of settlement, and the home must have been owned for at least 10 years and used as the main residence for some or all of that period.
Where eligible, many retirees use the downsizer pathway first, then add further funds via NCCs if within cap limits.
Keep It Simple—But Get It Right
The superannuation retirement phase is filled with opportunity—but also complexity. Retirement involves balancing income needs, tax minimisation, Centrelink entitlements, estate planning and compliance with evolving contribution and transfer caps.
Key points to remember:
Keep your superannuation structure as simple and understandable as possible
Ensure nominations and reversionary strategies are consistent with your estate goals
Document decisions clearly, and review them regularly
Seek advice when making major financial decisions, particularly where Centrelink, tax, or estate implications are involved
Poorly structured or non-compliant super strategies can be difficult—and sometimes impossible—to unwind. Planning ahead with appropriate guidance can help secure a confident and financially sustainable retirement.
Important disclaimer: The information in this article is general in nature and does not consider your personal financial circumstances. Before making any decisions, you should speak to a licensed financial adviser who can assess your individual needs. You can request a copy of any relevant advice documents or fact find notes used in the preparation of advice.