The Fine Print Australia · PUBLISHED 26 JUN 2026 · VERIFIED 26 JUN 2026 · AU EDITION

$650 a Year in Avoidable Tax: Transition to Retirement Strategy 🇦🇺

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Around 700,000 Australian retirees are reportedly leaving money on the table by keeping super in accumulation after retiring, which the Super Members Council says costs them about $650 a year each in avoidable tax.

The number that matters

The central number is $650/year: the average avoidable tax paid by retirees who keep super in accumulation instead of moving to an account-based pension, according to the Super Members Council as cited in 2024 commentary.

How it quietly costs you

The first quiet drain is staying in the wrong super phase: once you are eligible to move from accumulation to retirement income mode, the system can keep taxing earnings in accumulation instead of the more tax-effective retirement structure, creating avoidable annual tax leakage.

The quantified impact is about $650 a year per retiree for the estimated 700,000 Australians affected, which is a direct cost of not switching structure.

An old vs better comparison is straightforward: accumulation account with avoidable tax versus retirement income account/account-based pension, which AustralianSuper says is designed for members who have stopped working and meet eligibility criteria.

The second, compounding trap

The second layer is fees that keep compounding even when the balance is already being eroded by tax, especially administration fees, investment fees and transaction costs that can be hidden inside the product rather than shown as a single headline number.

ASFA says the average combined administration and investment cost in Australian super funds is around 1.3% of assets, while only a small minority of SG members face costs above 1% of assets; it also notes that some small retail products distributed through advisers can be around 2.5% or more.

The long-run cost is material because a fee of even 1.3% taken every year compounds over decades, reducing the income available when the member later converts to retirement income.

What this looks like in practice

Karen, 62, nurse, $82,000 income, $410,000 in super, still in an accumulation account, about 5 years from full retirement.

She would discover:

• Keeping super in accumulation can cost about $650 a year in avoidable tax once retired, according to the Super Members Council figure cited in 2024 reporting, compared with switching to retirement income mode.
• Her fund’s total cost may be around 1.3% of assets on average across Australian super, versus below 1% for much of the market and 2.5%+ in some small retail products, according to ASFA.
• Even if her fund advertises low admin fees, the total can still include investment fees and transaction costs that are deducted from returns and may not be obvious in the account transaction list.

The full cost of doing nothing

For Karen, the combined cost of both problems is roughly $5,000 to $10,000+ over a five-year transition window, before investment returns on the lost money are considered, based on $650/year of avoidable tax plus a plausible 1.3% fee drag on a $410,000 balance.

That estimate assumes she remains in accumulation for the whole five years and her effective all-in fund cost is near the ASFA average rather than a low-cost option.

What to do about it

• Check whether you should be in accumulation or retirement income mode using the ATO super retirement planning guidance and your fund’s retirement product pages; compare your current phase with eligibility to start an account-based pension.

• Log in to your super fund and find your current account type and tax treatment.

• Confirm whether you have met a condition of release and whether a retirement income account is available.

• Compare the tax on earnings in your current account versus retirement phase.

• What good looks like: you are in the most tax-effective structure available for your situation, not leaving money in accumulation by default.

• Compare your fund’s fees using the ATO YourSuper comparison tool and your Product Disclosure Statement, then look for the total fee drag, not just the admin fee.

• Open the ATO comparison tool and search your super fund.

• Check fees, net returns and the MySuper option side by side.

• Match those numbers against the PDS for investment fees and indirect costs.

• What good looks like: fees are at or below the low-cost end of the market, ideally well below the 1.3% average and not drifting toward 2.5%+ retail-style costs.

• Consolidate any duplicate super accounts via myGov / ATO online services so you stop paying multiple sets of fees and insurance premiums.

• Log in to myGov and open ATO online services.

• Find all super accounts linked to your TFN.

• Roll together any unwanted duplicate accounts after checking insurance consequences.

• What good looks like: one active account with one set of fees, not multiple accounts eroding balance and returns.

A myth worth clearing up

Myth: “Once I retire, my super automatically moves into the best tax setup.” Fact: Retirement-phase treatment usually requires you to actively move or open the right account; otherwise, money can stay in accumulation and keep attracting avoidable tax, which the Super Members Council says costs affected retirees about $650 a year each.

Sources

• ATO

Researched 2026-06-26.

Corrections & disclosure: an AI-assisted, human-reviewed guide. Every figure is dated and sourced above. Spot something out of date or wrong? Tell us and we’ll correct it — corrections are noted here and in the video description.