
Salary sacrificing into super can reduce your income tax today while boosting your retirement balance. This guide explains how it works, key limits, and how to model your numbers using our [Salary Sacrifice Calculator](/calculators/salary-sacrifice).

## Quick recap: how salary sacrifice works
- You ask your employer to redirect part of your pre-tax pay into super.
- Those contributions are generally taxed at 15% in super (or 30% if Div 293 applies).
- Your taxable income falls by the sacrificed amount, which can lower income tax and Medicare levy.
- Contributions count toward the concessional cap (employer SG + salary sacrifice).

## Key numbers to know
- **General concessional cap:** $30,000 per financial year (includes employer SG and salary sacrifice).
- **Contributions tax:** 15% (or 30% if your income for Div 293 exceeds $250,000).
- **Medicare levy surcharge (MLS):** still based on your taxable income after sacrifice.
- **Preservation:** money in super is locked until you meet a condition of release.

## Pros and trade-offs
**Pros**
- Lower taxable income and potentially lower tax.
- More going into super at a concessional rate.
- Automated, "set and forget" saving.

**Trade-offs**
- Reduced take-home pay now.
- Contributions are preserved until retirement conditions are met.
- Caps apply; excess contributions can be clawed back.

## How to size your sacrifice
1) Find your employer's SG amount (pay slip or HR).  
2) Subtract SG from the $30k concessional cap to see headroom.  
3) Decide how much you can give up in take-home pay.  
4) Check MLS and Div 293 thresholds if relevant.  
5) Model it with our [Salary Sacrifice Calculator](/calculators/salary-sacrifice).

## Model your numbers
Use the calculator to see:
- Change in take-home pay per pay period.
- Extra going into super after contributions tax.
- Projected super balance over your chosen timeframe.

Use the [Salary Sacrifice Calculator](/calculators/salary-sacrifice) to plug in your pay, frequency, and sacrifice amount.

## Common pitfalls to avoid
- **Exceeding the cap:** Include employer SG when calculating headroom.
- **Forgetting Div 293:** If income + reportable contributions exceed $250k, contributions tax can lift to 30%.
- **Cashflow shock:** Start small (e.g., $50-$100 per pay) and scale up.
- **Missing review:** Revisit each July or after pay rises/bonuses.

## Frequently asked questions
**Does salary sacrifice affect my HELP repayment?**  
Yes. HELP is based on your "repayment income," which adds reportable super contributions back.

**Can I stop or change the amount?**  
Usually yes - ask payroll. Many employers let you adjust each pay cycle.

**What if I'm close to retirement?**  
Salary sacrifice can still help; just watch the cap and ensure contributions hit before 30 June.

## Next steps
- Decide a trial amount you can spare from take-home pay.
- Confirm employer SG and cap headroom.
- Run your numbers with the [Salary Sacrifice Calculator](/calculators/salary-sacrifice).
- Set a reminder to review each financial year.

Happy sacrificing - and enjoy the tax win today while boosting tomorrow's balance.


Salary Sacrifice Into Super: How It Works (With Calculator)


**Account-based pensions (ABPs)** are the most common way Australians turn their superannuation savings into income during retirement. They’re flexible, tax-effective, and designed to let your super remain invested even while you make withdrawals.

But retirees often have two big questions:

- **“How much can I safely withdraw?”**  
- **“How long will my super last?”**

This guide breaks down how ABPs work, how minimum withdrawals are calculated, how investment returns and inflation affect your balance, and how to run your own numbers using the **[Account-Based Pension Calculator](/calculators/account-based-pension)**.

---

## Quick Summary: What Is an Account-Based Pension?

When you retire or reach your preservation age and meet a condition of release, you can convert all (or part) of your superannuation into an **account-based pension**. This creates a retirement income stream.

With an ABP:

- Your super remains **invested** (shares, bonds, diversified portfolios, etc.).
- You must withdraw **at least the annual minimum**, based on your age.
- You can withdraw **more than the minimum**, but not less.
- Once you’re aged 60 or over (for most people), your withdrawals are **tax-free**.
- Investment earnings inside a retirement-phase pension are **generally tax-free** (0% tax rate).

The challenge is balancing how much you withdraw vs how long your money needs to last.

You can model this for your own retirement using the **[Account-Based Pension Calculator](/calculators/account-based-pension)**.

---

## Minimum Drawdown Rates in Australia

The Australian Government sets **minimum annual withdrawal rates** depending on your age. These apply to the balance of your ABP at **1 July each year**:

| Age | Minimum % |
|------|-----------|
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95+ | 14% |

This means:

- A 66-year-old with $500,000 must withdraw **at least 5%** ($25,000) over the financial year.
- A 72-year-old with $800,000 must withdraw **at least 5%** ($40,000).
- As you age, your required minimum rises.

### Why the minimum rises over time  
The system is intentionally designed to ensure funds **gradually pay out** rather than accumulate indefinitely.

### What if you want to withdraw more?  
You can — there's no upper limit. But withdrawing too much risks your retirement savings running out earlier than expected.

---

## How Your ABP Balance Changes Each Year

Your account-based pension balance moves through a simple cycle:

1. **Opening balance**  
2. **Earnings or losses** (investment returns)  
3. **Fees**  
4. **Withdrawals** (minimum + any extra)  
5. **Closing balance**  

In formula terms:

Closing Balance = Opening Balance + Earnings - Fees - Withdrawals

But in practice, the sequence and size of returns matter. For example:

- A 10% decline early in retirement has a **much bigger impact** than the same decline later (sequence-of-returns risk).
- Taking large withdrawals in a down year accelerates depletion.
- Keeping withdrawals closer to the minimum helps extend longevity.

You can simulate this year-by-year with the **[Account-Based Pension Calculator](/calculators/account-based-pension)**, including CPI-indexed withdrawals and investment market assumptions.

---

## Tax Treatment: Why ABPs Are So Powerful After Age 60

Most retirees enjoy two key tax advantages:

### 1. Withdrawals are tax-free  
If you're over 60 and retired (or have met another condition of release), your pension payments are **tax-free**.

### 2. Earnings are tax-free within the fund  
Investment returns inside a retirement-phase ABP are taxed at **0%**, compared to **15% in accumulation phase**.

This combination boosts how long your money lasts compared to investing outside super.

---

## Example: How Long Would $600,000 Last?

Let’s look at a simplified example to illustrate how ABP withdrawals behave over time. Assume:

- Starting balance: **$600,000**  
- Age: **65**  
- Minimum withdrawal: **5%**  
- Investment return: **6% p.a.** (balanced portfolio)  
- Fees: **0.7%**  
- Withdrawals increase with CPI at **2.5% p.a.**  

**Year 1 withdrawal:**  
5% × $600,000 = **$30,000**

**Earnings:**  
6% × $600,000 = **$36,000**

**Net change:**  
Earnings – fees – withdrawals ≈ **small positive**.

First few years might show slow growth or slight decline depending on market performance.

But once the minimum rises to 6%, 7%, and beyond, withdrawals accelerate, and the balance gradually reduces.

A balanced portfolio might sustain payments for 25–30 years depending on returns and withdrawal rates.

To see your own scenario, use the **[Account-Based Pension Calculator](/calculators/account-based-pension)**, which fully models:

- minimum drawdown rules,  
- CPI-indexed withdrawals,  
- variable investment returns,  
- capital depletion over time,  
- longevity risk,  
- fees,  
- tax-free pension phase.

---

## The Big Question: “How Much Can I Safely Withdraw?”

There’s no single number that works for everyone — it depends on:

- starting balance  
- investment portfolio & risk level  
- age  
- life expectancy  
- annual spending  
- whether you increase withdrawals with inflation  
- whether you take only the minimum or more  
- market performance in the early years  

### Three general rules of thumb

#### ✔ Rule 1: Staying close to the minimum generally extends longevity  
If your goal is to make your balance last as long as possible, withdrawing near the minimum (4–5–6%) is usually safer.

#### ✔ Rule 2: Indexing withdrawals by CPI makes them sustainable  
Most retirees want income that rises with living costs.  
The calculator allows you to model CPI-indexed or fixed withdrawals.

#### ✔ Rule 3: Higher equity exposure helps longevity — but increases volatility  
Balanced or growth portfolios typically support longer payout periods, but come with more ups and downs.

Run these comparisons in the **[Account-Based Pension Calculator](/calculators/account-based-pension)** — it’s designed exactly for this type of decision.

---

## Sequence-of-Returns Risk: The Danger Nobody Talks About

One of the biggest factors affecting how long your ABP lasts is **the timing of market returns**.

If you suffer downturns early in retirement while drawing income, you may permanently reduce your capital — even if the average long-term return is good.

This is called **sequence-of-returns risk**, and it’s why:

- withdrawing too much early can be dangerous  
- staying diversified matters  
- some retirees choose to hold a cash buffer for withdrawals  
- modelling different investment scenarios is essential  

The calculator helps you visualise this by showing how your balance changes year-by-year with CPI-indexed withdrawals.

---

## How Fees Affect Retirement Longevity

Even small differences in fees compound over decades.

For example:

- A fund charging **0.9%** vs one charging **0.5%** may seem minor, but over a 25-year retirement this can reduce the ending balance by **tens of thousands of dollars**.

In retirement-phase pensions, every 0.1% counts because withdrawals are compulsory — you’re drawing down capital *and* incurring fees simultaneously.

---

## Who an Account-Based Pension Is Suitable For

ABPs generally work well if you:

- are retiring or semi-retiring  
- want flexible retirement income  
- value tax-free earnings and payments  
- have moderate–high comfort with investment risk  
- want your super to stay invested rather than sit in cash  
- want an income that can last decades  

They are ideal for people in their 60s, 70s, and 80s who want a mix of **growth + income**.

---

## When an ABP Might Not Be Right

Account-based pensions may not suit you if:

- you need guaranteed income (consider an annuity instead)  
- you have very low risk tolerance  
- you can't handle portfolio volatility  
- you're uncomfortable with drawdowns in a falling market  
- you need to retain funds in accumulation for tax or contribution reasons  
- you may return to work and wish to keep contributing  

If you’re unsure, seek financial advice — ABPs are powerful but require understanding of your spending needs, risk appetite, and long-term goals.

---

## How to Model Your Own Retirement Income

The quickest way to understand how long your super may last — and what you can safely withdraw — is to build a personalised projection.

Use the **[Account-Based Pension Calculator](/calculators/account-based-pension)** to model:

- starting balance  
- investment returns  
- minimum drawdowns  
- CPI-indexed withdrawals  
- fees  
- depletion timeline  
- age at which balance reaches zero  

You’ll see:

- year-by-year balances  
- withdrawal amounts  
- investment earnings  
- how long your ABP may last  
- how different withdrawal amounts change longevity  
- how higher/lower returns affect the outcome  

It’s one of the clearest ways to stress-test your retirement income plan.

---

## Frequently Asked Questions About Account-Based Pensions

### Are my ABP withdrawals tax-free?
If you’re over 60, yes — withdrawals are generally tax-free.

### Do I have to withdraw more than the minimum?
No — but you can withdraw more if you choose.

### What happens when I reach age 75?
Your minimum percentage increases. The calculator automatically applies next year’s minimum based on age.

### Can my balance increase even though I’m withdrawing?
Yes — in years where investment returns exceed your total withdrawals + fees.

### What happens if my balance hits zero?
Payments stop. ABPs cannot go negative. This is why modelling longevity matters.

### Can I have more than one ABP?
Yes — many retirees run multiple pensions, often for tax and estate planning reasons.

### Are earnings inside my pension taxed?
No — retirement-phase ABP earnings are generally tax-free inside the fund.

---

## Key Takeaways

- Account-based pensions are flexible, tax-effective retirement income streams.  
- Minimum withdrawal rates increase as you age.  
- How long your super lasts depends heavily on withdrawals, returns, and inflation.  
- Sequence-of-returns risk makes early retirement planning essential.  
- Staying near the minimum often supports longer-term sustainability.  
- Use the **[Account-Based Pension Calculator](/calculators/account-based-pension)** to model your own numbers.  

---

*Disclaimer: This article provides general information only and does not constitute personal financial, superannuation, or tax advice. You should seek professional advice before making decisions about retirement income streams.*


A clear Australian guide to understanding account-based pensions — minimum drawdown rules, tax treatment after 60, investment risks, and how to model retirement income with our ABP calculator.

Account-Based Pensions in Australia: How Withdrawals Work, Minimum Rates, and How Long Your Super May Last


Planning your retirement income shouldn’t feel like a spreadsheet marathon.  
Our **Account-Based Pension (ABP) Calculator** makes it simple to set an annual income, apply **CPI indexing**, and automatically respect the **legislated minimum drawdown** for your age.

Whether you’re just starting your pension or reviewing an existing one, the calculator shows how your **income, balance, returns, and fees** interact over time.

---

## Table of contents
1. [What you’ll need](#what-youll-need)
2. [How to use the calculator](#how-to-use-the-calculator)
3. [Understanding the outputs](#understanding-the-outputs)
4. [Common pitfalls to avoid](#common-pitfalls-to-avoid)
5. [Next steps](#next-steps)

---

## What you’ll need

Before you begin, have these details handy:

- **Opening ABP balance** (e.g. $500,000)  
- Your **current age**  
- Expected **investment return** (per year)  
- Estimated **fees** (per year)  
- Your **preferred annual pension amount**  
- Optional: expected **inflation (CPI)** rate if you want to index payments each year  

These inputs allow the calculator to model realistic income and balance projections under Australian rules.

---

## How to use the calculator

1. Open the **[Account-Based Pension Calculator](/calculators/account-based-pension)**.  
2. Enter your starting balance, age, return assumptions, and fees.  
3. Choose your desired **annual pension**.  
   - If it’s below the minimum, the calculator will automatically apply the **legislated minimum** for your age.  
4. Turn on **“Index by inflation (CPI)”** if you want your pension to increase with living costs.  
5. Select your **projection length** and review the results in the charts.

> **Tip:** The calculator displays both **annual income** and **balance projections** side by side, so you can see how withdrawals, earnings, and fees affect your pension over time.

---

## Understanding the outputs

The results help you visualise how your income and balance evolve throughout retirement:

- **Income projection** – shows your pension payments year by year, with CPI adjustments (and minimums enforced).  
- **Balance projection** – tracks how your super balance changes after withdrawals, earnings, and fees.  
- **Totals** – shows total income drawn and your final balance at the end of the projection.  
- **Minimum drawdown table** – displays the current legislated percentage by age group.

> **Example:** A 70-year-old with a $500,000 balance must draw at least 5% ($25,000) in the first year. The minimum increases with age.

---

## Common pitfalls to avoid

Avoid these common mistakes when modelling your pension:

- **Ignoring minimum drawdowns:** The government sets mandatory minimums based on age — the calculator applies them automatically.  
- **Underestimating fees:** Even a 1% annual fee compounds over time, reducing your long-term balance.  
- **Overly optimistic returns:** Run at least one scenario with a lower investment return to stress-test your plan.  
- **Forgetting inflation:** Without CPI indexing, your real spending power can fall each year.

---

## Next steps

Once you’ve tested a few scenarios:

- Compare **different CPI rates** (e.g. 2% vs 3%)  
- Model **higher drawdowns** for the first few years of retirement  
- See how **lower returns** affect your future balance  
- Review the results with your **financial adviser or fund representative**

> The goal isn’t just to maximise income — it’s to create a sustainable, flexible plan that lasts as long as you do.

---

**Ready to model your plan?**  
Open the [Account-Based Pension Calculator](/calculators/account-based-pension) and explore how small changes in income, inflation, and returns can shape your retirement future.

---

*Disclaimer: This article provides general information only and does not constitute financial advice. Always consider your personal circumstances and seek professional guidance before making financial decisions.*


A clear, step-by-step guide to modelling your Account-Based Pension (ABP) income, minimum drawdowns, CPI indexing, and projected future balance.

#superannuation

Salary Sacrifice Into Super: How It Works (With Calculator)

Account-Based Pensions in Australia: How Withdrawals Work, Minimum Rates, and How Long Your Super May Last

How to Use an Account-Based Pension Calculator (Australia 2025 Guide)