Millions of retirees are paying super tax they could avoid

Opinion

Bec WilsonMoney contributor

October 31, 2026 — 5:01am

October 31, 2026 — 5:01am

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 financial sense. But not everyone wants or needs to start withdrawing their super at 65.

Some people have good reasons to leave things as they are, in accumulation, while others simply don’t know they can make the switch and become tax-free, or don’t know how to do it. And then there’s probably quite a few people who find the whole superannuation and age pension systems all too hard.

Now, some of the biggest thinkers and super funds in the retirement system are arguing that the system needs to change – and they’ve got some interesting views on how to do it.

HESTA chief Robbie Campo wants super funds to be able to automatically move eligible members into retirement accounts, unless they choose to opt out. And I can see why, for some people, this would be a really helpful approach.

Two experienced actuaries, Nick Callil and David Knox have suggested a different way. They want every super fund to offer a ready-made retirement pension, with the investment options and minimum withdrawals already worked out, that members can activate by pressing one big green button. Remove all the complicated forms and personal decisions. Just hit the button and start receiving retirement income.

And their proposal goes further, suggesting people be forced into a retirement income stream (or retirement pension) at age 75.

I can see a lot of merit in making it easier for everyday people to turn their super into a tax-free income. But I’m very wary of giving every super fund the power to automatically move members into its own retirement products without significant scrutiny of what they’re being moved into and how that will serve their needs.

After all, not all retirement products are created equal. Some funds are no doubt serious about helping members who are missing out on money that could make their later years more comfortable.

But others might see automatic transfers as a very convenient way to hang onto members and their money, without ever helping them understand the bigger picture of retirement, the choices available to them, or encouraging them to take a closer look at performance, fees and services on offer.

And this brings me to what I think the bigger problem is. We’ve made it incredibly easy for Australians to put money into super, but remarkably difficult to turn it into retirement income.

Super is poorly understood and moving into a retirement account can be unnecessarily complicated, depending on which fund you’re with, and navigating Centrelink to claim the age pension is ridiculously difficult.

This week, my Facebook wall has been filled with comments from people tearing their hair out trying to claim the age pension. The forms, the sheer difficulty of dealing with Centrelink, the extraordinary waiting with no feedback before a request for one tiny additional detail, then back to waiting again.

Meanwhile, Callil and Knox point to the lengthy forms and complicated decisions people have to make to move their own super into a retirement account.

Yet, we keep describing Australians as disengaged as though they are the problem. Maybe we should ask how much of that disengagement the industry and the government have created by making retirement so complicated that people can’t bear to tackle the process of unlocking their own money or simply don’t know they can do it at all.

And there’s another consequence – by making retirement so complicated we’re creating a lot of need for financial advice that people might not need otherwise.

Sure, some people really do need comprehensive financial advice. But should someone with a modest super balance and a potential age pension entitlement really need to pay thousands of dollars just to work out how to access their own retirement income?

I’m all for a big green button, but it needs to come with proper education, serious benchmarking of super funds for the retirement phase, genuine choice and the freedom to take your money elsewhere.

I’d like to see super funds able to make the transition into retirement much easier, with clear explanations of the choices available, what they cost and what they mean for the income you will receive.

And I’d like the government to do its bit too, starting with simplifying the age pension application process, using information it already holds rather than making people repeatedly provide it in a difficult and often painfully slow game of back and forth.

And while we’re at it, the government’s long-delayed Delivering Better Financial Outcomes reforms, designed to make low-cost financial advice more accessible, also need fast-tracking. We’ve been talking about fixing the advice gap for years. The Baby Boomer wave is retiring right now. What are you waiting for? Until they’ve all retired?

It’s time we all gave the retirement process a lot more attention. If you’ve struggled to navigate your super fund, or claim the age pension, it’s time to tell your local Federal MP about your experience. Tell them what was difficult, how long it took and that it needs to change.

Some of the complexity is built into legislation and regulation – and all the things funds aren’t allowed to do for their members. Some comes from the way super funds and government agencies have chosen to implement it. Either way, it’s time we stopped expecting Australians to navigate all of it on their own, or pay thousands of dollars for complex financial advice just to get help.

We’ve spent decades making it easier for Australians to save for retirement. Surely it’s time we put just as much effort into making it easy for them to actually retire.

Bec Wilson is the bestselling author of How to Have an Epic Retirement, a retirement educator and founder of the Epic Retirement Institute. She writes a weekly newsletter about modern retirement at au.epicretirement.net. Bec has various commercial arrangements with a range of organisations, including superannuation funds.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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Bec Wilson is the bestselling author of How to Have an Epic Retirement, a retirement educator and founder of the Epic Retirement Institute.  She writes a weekly newsletter about modern retirement at au.epicretirement.net. Bec has various commercial arrangements with a range of organisations, including superannuation funds.

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