Representation. An elderly couple.
Retirees who fail to switch to a pension account could face an additional AU$650 in taxes annually.

Around 700,000 Australians aged over 65 could be paying unnecessary tax on their superannuation by keeping their funds in an accumulation account instead of transferring them to a pension account, according to the Super Members Council (SMC).

For a retiree with AU$100,000 in an accumulation account, the tax on superannuation earnings could reach as high as AU$4,500, 9News reported.

Funds in the accumulation phase are taxed at 15% on investment earnings, while those in the retirement phase are tax-free.

Retirees who fail to switch to a pension account could face an additional AU$650 in taxes annually, which could add up to AU$9,000 over the course of a typical retirement.

Tax losses due to lack of awareness

The average super balance for men aged 65-69 is AU$453,075, while women in the same age group have an average balance of AU$403,000, according to the ATO. If these funds remain in the accumulation phase, retirees could lose thousands of dollars toward taxes.

The SMC has expressed concern that many older Australians have not received basic advice about transferring their super into the tax-free retirement phase.

Based on SMC research, 39% of retirees keeping funds in an accumulation account do so because they don't know what to do with it.

Only 26% of retirees have obtained financial advice from their super fund, while four out of five Australians aged 45-54 require advice but are unable to afford it.

"Not knowing enough about super can lead to poor decisions, like leaving accounts inactive or withdrawing funds without proper planning," said Super Members Council CEO Misha Schubert. "Making simple information and advice available to more Australians is a big missing piece of the retirement puzzle."

Steps retirees need to take

If superannuation funds are still in the accumulation phase, retirees need to transfer to the retirement phase, which will help them save them thousands in taxes.

Financial advisers and super funds can help with this process, and government reforms are working to make financial advice more accessible.

The government's "Delivering Better Financial Outcomes" package aims to make financial advice more affordable for all Australians, though it has not been legislated.