Approaching retirement brings a series of important financial decisions. One opportunity that is often overlooked is the so-called ‘retirement bonus’, a tax-related adjustment that can increase your retirement balance when you commence a pension.
Understanding how it works, and whether it applies to you, can help you make more informed decisions as you move into retirement.
What is the retirement bonus?
During your working life, your superannuation sits in an accumulation account. Earnings within this account are taxed, so super funds set aside money to meet future tax obligations on investment gains.
When you retire and move your super into an account-based pension, the rules change. Earnings on investments within a pension account are generally tax-free. As a result, the tax provisions that were previously set aside are no longer required.
Some super funds return this excess provision to members when they commence a pension. This amount is referred to as a retirement bonus. Rather than being paid in cash, it is usually added to the starting balance of your pension account, increasing the capital available to generate retirement income.
How do you become eligible?
Not all super funds offer a retirement bonus, so the first step is confirming whether your fund provides one.
Eligibility requirements vary, but generally you must have reached preservation age and met a condition of release, such as retiring from the workforce. For most Australians born after 30 June 1964, preservation age is 60.
Many funds also require that you have been a member for a minimum period, often 12 continuous months, and that your super has been invested in eligible options during that time.
If you meet the criteria, the process is typically automatic. When you commence your account-based pension, your fund calculates the bonus based on your balance and applies it to your new pension account.
How can the bonus be used?
For some retirees, the most effective approach is to leave the bonus invested, allowing it to compound and support long-term income needs. Over time, even a modest increase to your starting pension balance can enhance flexibility and sustainability.
Others may choose to draw on part of the bonus to fund lifestyle goals, such as travel or a major purchase, particularly in the early years of retirement when spending is often higher.
The right decision depends on your broader retirement objectives, income needs, and estate planning considerations. Importantly, the retirement bonus should not be viewed in isolation. It is one piece of a much larger retirement strategy.
Source: This article was originally published on Advisely with the title “What is the retirement bonus and how do you get it?” on 11 December 2025.
Building confidence for the future
If you are approaching retirement or considering moving your super into pension phase, speaking with an adviser can help ensure you make informed decisions at the right time.
If you would like to understand whether a retirement bonus may apply to you, and how it fits into your overall retirement strategy, our advisers are here to help. Contact us today.
This information provided in this article is general advice only and has been prepared without taking into account your own objectives, financial situation or needs. Before making a financial decision based on this advice, you must consider whether it is appropriate in light of your own needs, objectives, and financial circumstances, and where relevant, obtain personal financial, taxation or legal advice. Where a financial product has been mentioned, you should obtain and read a copy of the Product Disclosure Statement (PDS) prior to making any decisions about whether to acquire a product.