The Financial Reality of Being a (Moderately) Wealthy Retiree in Australia

Unless you are quite wealthy, not well organised or under 60, you shouldn't be paying any income tax in this phase of life. The following breakdown is based on my expected income and tax figures for the 2026-27 tax year.*

First, since transferring the maximum allowed into an "account based pension", I should get a tax-free pension of $81k per year. This is the minimum allowed distribution to maintain the tax-free status of my pension account. For my employer superannuation, that is as simple as just setting up a payment of $2,750 each month from the account. For our self-managed super fund (SMSF), I have to make sure I have enough cash in our Macquarie Cash Management Account to pay the $4,000 a month pension. Currently, I have around one year's worth of cash there. The SMSF will still be paying tax on Moominmama's account, my small remaining accumulation account, and concessional contributions. More on that later.

Then I expect to earn to around $100k net outside super, which would put me in the 32% tax bracket. This includes quite a lot of capital gains that I plan to take this year before the new CGT regime comes into effect. To reduce my tax liability, I will make the maximum allowed concessional superannuation contribution. I call this a no-brainer contribution, as being retired, I could take it out again the next year. The contribution will reduce my taxable income by $32,500.**

The contribution is taxed at 15% in the SMSF. But as that is less than 32%, it is a win, and that is not income tax. 

On the remaining $67k, there might be about $13.5k in tax payable. But I expect to have around $20k in franking credits and early stage venture capital offsets. These more than wipe out my tax liability, resulting in a tax refund of $6.5k adding to my income. So, I will have negative income tax. I have then $165k in disposable income, which almost covers our expected expenses of about $180k. The remainder will be covered from Moominmama's earnings.***

In order to pay income tax, you would probably need to be at least in the 37% marginal tax bracket–more than $135k of income outside superannuation. This is assuming you have a supply of franking credits and do a little borrowing etc. to generate deductions.

If you are a retired couple, you can double all these figures for a household income. 

* In Australia, the tax year runs from 1 July to 30 June. All numbers are Australian Dollars.

** You can make concessional contributions up to age 67 without a work test. But after age 65 the minimum required pension jumps to 5% of the account value. So, you might want to reduce capital gains realisations.

*** I won't exactly spend the capital gain, as the proceeds of those transactions will largely be reinvested. First of all, the part of the proceeds that is the original investment doesn't enter income, and only 50% of the gain is recorded as income under the current rules. But I could spend the $165k and only need $15k from Moominmama.