ARI | 1-31-25 AM: Australian Retirees Are Being Overtaxed

January 31, 2025

Today’s Story

The Super Members Council (SMC) has identified that approximately 700,000 Australian retirees over the age of 65 may be overpaying taxes by not transitioning their superannuation funds from accumulation mode to retirement mode. In the retirement phase, earnings on super funds below $1.9 million are untaxed, whereas in accumulation mode, they are taxed at 15%. 

This oversight could result in retirees paying an average of $650 extra annually in taxes, affecting a total of $90 billion in super funds. SMC CEO Misha Schubert emphasizes that many retirees are unaware of this issue, leading to unnecessary financial losses. Proposed federal legislation aims to provide affordable, basic advice from super funds, potentially benefiting retirees with low super balances who might not otherwise seek financial advice due to cost concerns. The Council urges the government to enact these reforms promptly to enhance retirees' financial decision-making.

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Fun Fact

Transitioning your superannuation fund to retirement mode can lead to significant tax savings, yet many retirees remain unaware of this opportunity.