By Paul Feeney, Founder and Chief Executive Officer, Otivo
Most people picture retirement income as a single tap, the super balance, turned on. In practice it's more like a set of taps, super, the Age Pension, and any savings or investments outside super, each with its own flow and its own rules. Maximising your income is often less about the size of any one source than about how you combine them. Here's how the pieces fit together.
Quick answer
Retirement income usually comes from a mix of sources, an account-based pension from super, the Age Pension, and any income from investments outside super. Maximising it is about how those sources combine, not just the size of your balance. As at July 2026, earnings in the retirement pension phase are generally tax-free up to the transfer balance cap of $2.1 million.
Where does retirement income actually come from?
For most Australians, three sources do the work. Super, usually drawn as an account-based pension, tends to be the largest for people who've worked full careers. The Age Pension provides a means-tested foundation many retirees draw on, in full or in part. And income from assets outside super, such as savings, shares or an investment property, tops up the rest. Seeing retirement income as this combination, rather than as your super balance alone, is the first step to getting more from it.
Why does the structure matter as much as the size?
Because how you hold and draw your money affects both tax and Age Pension entitlements. Earnings supporting an account-based pension are generally tax-free in the retirement phase, which is a meaningful advantage over holding the same assets elsewhere. At the same time, the Age Pension is income-and-assets tested, so the mix of assessable and exempt assets can change what you receive. Two retirees with identical wealth can end up with different incomes depending purely on how that wealth is structured, which is why the arrangement deserves attention.
How does the Age Pension interact with super income?
It works as a means-tested top-up rather than an all-or-nothing payment. As you draw down super or hold other assessable assets, Age Pension entitlements taper according to the income and assets tests. For many retirees the result is a blend, part super income, part Age Pension, that shifts over time as balances change. Because the thresholds are detailed and adjust regularly, Services Australia is the authoritative source for how the tests apply to a particular situation.
What levers can help maximise income?
Several are worth understanding, always as general options rather than personal advice. Structuring super into a tax-free account-based pension, sequencing which assets you draw first, and timing when income is realised can all influence the after-tax, after-pension result. Keeping investment costs low leaves more income in your hands, and matching your investment approach to a retirement that may last decades helps the money keep working. For someone like a 66-year-old with $480,000 in super and a part Age Pension, small structural choices can make a surprising difference to the yearly figure. What suits any individual depends on their circumstances.
Frequently asked questions
Can I receive the Age Pension and draw from my super at the same time?
Yes, and many retirees do. The Age Pension is means-tested, so drawing super income and holding other assets can reduce it, but a large number of retirees receive a part Age Pension alongside their super income.
Is my retirement income taxed?
Earnings on assets supporting an account-based pension are generally tax-free in the retirement phase, up to the transfer balance cap of $2.1 million for 2026-27, and for most people over 60 pension payments from a taxed fund are tax-free. Income from assets outside super is generally assessable.
Does how I structure my assets affect my retirement income?
It can, significantly. Tax treatment and Age Pension entitlements both depend on how and where your wealth is held, so two people with the same total assets can end up with different incomes depending on the structure.
Where to from here
Getting the most from retirement income is a structuring question as much as a saving one. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a retirement planning module that models how your super, Age Pension eligibility and other assets could combine into income, based on your age, balance, investments and goals. It helps you see the whole picture rather than one tap.
Sources
- Services Australia — Age Pension income and assets tests — servicesaustralia.gov.au
- Australian Taxation Office — retirement phase and transfer balance cap — ato.gov.au
- ASIC MoneySmart — retirement income sources — moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.