Superannuation Rules for Over 55s

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46 Comments

  1. Aladdin Chawshin

    I born in August 1954, Am I entitle to withdraw my super with out paying TAX?

    Reply
    • Chris Strano

      Hi Aladdin. Superannuation withdrawals from over the Age 60 are generally received tax free. There may be tax payable if your superannuation balance includes a ‘taxable (untaxed) component’. You should check this with your superannuation fund and confirm your position with your accountant.

      Here is an article for people over age 60.

      You also need to meet a condition of release before accessing super. Click here for more info

      Reply
  2. Matt

    Hi Chris

    Background: My wife is 57 and hasn’t worked for many years. Through prior contributions and contribution splitting she has about $300K which would be probably 90% concessional contribution. I will shortly receive a redundancy payment and likely won’t be working full time. With other funds we will have $540K in cash available for her to put into super.

    My question: is it correct that she could set up a pension account with this cash, draw down a pension at say 7% and pay no tax on the income stream whilst the pension account also earns “interest” and pays no earnings tax?

    Thanks

    Matt

    Reply
    • Chris Strano

      Gday Matt
      Apologies for the late reply.
      Answer to your question: (follow me on this one)
      1. She can commence a pension if she is retired and has no intention to return to work.
      2. All earnings received from assets in ‘pension phase’ are received tax free – regardless of age or tax components (i.e. taxable/taxfree).
      Here’s where it gets a bit tricky…..
      3. If she contributed $540,000 into her super account (together with the $300k) and decided to commence a pension with all or some of that balance, the pension would need to be commenced proportionality with the taxable/tax free components. Whatever % split this is (e.g. 65%/35%) would remain static for the life of the pension and all pension payments would need to be taken proportionately.The tax free component of each pension payment would be received tax free and the taxable component would be taxed at her MTR (while under age 60), with a 15% tax rebate. Note: She is unable to choose to commence a pension with ONLY the tax free component.
      4. However, she may be able to create 2 ‘superannuation interests’ by commencing an income stream prior to the contribution and therefore keeping the components separate. I would STRONGLY suggest discussing your options with your accountant/adviser prior to making the contribution as it could be very beneficial.

      Reply
      • Matt

        Got it and yes I am going to see the accountant shortly.

        For clarity the intention is to open a second super account with the $540 cash and then convert this to a pension account. The other $300K super account would remain separate and in the accumulation phase. Sort of a TTR set up. In this circumstance is it correct that the earnings in the pension account and its income stream are tax free?

        Many thanks for your thoughts and particularly your website that is so valuable for background and ideas for those of us thinking about retirement.

        Reply
        • Chris Strano

          Hi Matt
          Remember all earnings in any pension account are tax free – regardless of tax components.
          The $540k is used to setup a 2nd pension account (assuming other $300k is the first pension account). Once the 2nd $540k pension commences you may decide to roll the $300k back to accumulation phase if you like. $540k pension should consist only of a tax free component. All pension payments made from a tax free component are received tax free – even if under age 60.

          Reply
  3. Steve B

    Hi, ive recently turned 55 , I havn’t worked for 2years due to a bad knee injury , and cant do my normal construction work again. Can I claim my super because of my injury and financial hardship ?

    Reply
  4. steve

    I’m 55 last Dec and working part time how can I access my super

    Reply
    • Chris Strano

      Hi Steve,
      You are able to access your super under a transition to retirement income stream. This is an income stream that you can commence with all or some of your super balance while still working. However, you will be limited to withdrawing 10% of the account balance each year – speak to your super fund for further assistance.

      Reply
  5. Denise M

    Hi Chris, I am 58, was made redundant in Jan 2014 and have been on a disability support pension ever since due to a back injury and unlikely to ever be able to return to work. I have approx $16, 000 credit card debt that I am struggling to pay back and was wondering if I can access the preserved $64, 000 I have in my MLC super fund?

    Reply
    • Chris Strano

      Hi Denise, here is a list of superannuation conditions of release – which are conditions that need to be met to access your super https://www.ato.gov.au/Super/Self-managed-super-funds/Paying-benefits/Conditions-of-release/. You can access your super without restriction if you reach your preservation age (for you this is 55) and have no intention of returning to work. However, if you intend on returning to work, this is not an option for you. Given that you have reached your preservation age, you also have the ability to commence a TTR income stream; however this limits you to withdrawing 10% of your account balance each year.
      Check if you have insurance within your super that may be able to be claimed upon.
      You should contact MLC and explain to them the particulars of your situation. They may have a solution for you.

      Reply
  6. Raj

    Hi Chris,
    I turn 60 in September. I am still working and I am contributing to Super.
    I would like to withdraw a lump sum – $150,000 from my super to pay of some debt.

    Firstly is anything stopping me from doing this and secondly am I liable for tax. Thanks.

    Reply
    • Chris Strano

      Hi Raj
      You will need to meet a condition of release to access your superannuation.
      Full access to your super will require you to:
      1. be permanently retired with no intention of returning to work; OR
      2. be over age 60 and have an employment arrangement come to an end.
      You can have partial access to your super via a transition to retirement income stream; however this will limit your access to 10% p.a. of your account balance.
      No tax is payable on withdrawals made from super after age 60.
      I would suggest discussing the particulars of your situation with your adviser/accountant or your superannuation fund

      Reply
  7. Dieter

    Hi Chris,
    I am 63 and a bit and I would like to draw my super as a lump sum. At the moment it is possible to do so but with all the possible changes to the super rules I am quite sure this will be over maybe before or straight after the next election. I am going to get my pension from Germany once I retire. I would prefer to have my super money to my disposal and not being supervised by the government what I can or can’t do with it.
    My question would be: can I withdraw my super as a lump sum and still keep working until next year April/May with the same employer/company. If this is not the case, the company I am working for has got another company (with a different work direction) in the same company group. Can I cease work and start with the other company until next year April/May. I would only need to be employed for the next 7 to 8 month and than I would apply for an early German pension which I could have applied for with 63 but with some deduction. (Each month after 63 has got a deduction of 0.3%). Mid next year I am going to be 64 and this would be just the right time to retire.

    I would appreciate you advise.

    Thanks
    Dieter

    Reply
    • Chris Strano

      Superannuation has a number of ‘conditions of release’ to access your full superannuation balance. In relation to retirement, these include:

      1. permanent retirement after your preservation age with no intention of returing to work
      2. ceasing an employment arrangement after age 60 – this could include changing roles and entering into a new employment agreement
      3. attaining age 65

      If you meet conditions 1 or 2, but then begin to accumulate additional contributions after accessing your super, the new contributions will be inaccessible until you meet another condition of release.

      Reply
  8. shirley veluz

    Hi chris, I turn 55 on April 19, 2016. My preservation age would be in 2017. Im thinking of retiring to get hold of the lump sum super which is as as of now 301k. Would that would be wise? Im desperate to have some cash to do a few things and Im relying on my super.

    Thanks,
    Aley

    Reply
    • Chris Strano

      You really need to discuss your objectives and options with a financial planner. There would likely be tax implications if you were to withdraw your super prior to age 60 under current rules. Please speak to your adviser or let me know if you would like me to put you in touch with one.

      Reply
  9. Estelle Con Goo

    Am 56 in August. Am in severe financial hardship. Am not working at the moment, but do not want to retire. Super companies have all said no to my being able to access any funds. Any suggestions please?

    Reply
  10. Indi

    Hi Chris,
    there is a likelihood in the next couple of weeks my employment I going to be terminated I am just wondering if I am able to access some of super to see me through until I find a job and most likely have to sell my house as I wont be able to afford the mortgage payment and have a few other debts, loan and credit card.

    Reply
    • Indi

      sorry I am 62 years old and have been paying super since 2005 when I cam to Australia

      Reply
      • Chris Strano

        Ahhh, ok. Well, then you may be able to access it under the provision of ‘ceasing an employment arrangement after age 60’. This should be able to be confirmed by your superannuation provider.

        Reply
    • Chris Strano

      Generally you are unable to access your super until you meet a condition of release such as permanent retirement with no intention of returning to work after reaching preservation age, ending an employment arrangement after age 60, or reaching age 65. It may be best to discuss your specific circumstances with an adviser or with your superannuation provider for a more precise answer

      Reply
  11. Sammi

    Hi Chris,
    I am 58 and never work in Australia. I currently have $280k accumulated in my super which was mainly contributed by my husband via contribution splitting (all concessional). I intend to withdraw $195000 as lump sum from my super and recontribute $210000 towards the pension account jointly set up with my husband. My husband is 60 and retired. He withdrew all his super as lump sum and recontribute most in the pension. As a result all contributions in the pension are now tax free. What are the rules of setting up income stream (assuming in the middle of the year) and what are the tax implications for me and my husband?

    Reply
    • Chris Strano

      Hi Sammi. Thanks for the question. There are many questions within your question. 1. An account based pension cannot be setup ‘jointly’. It is either your pension account or your husbands. You might have a SMSF whereby all of your assets are pooled, but there is still a breakdown behind the scenes as to what is yours and what is his. You need to decide whether the contribution is being made into his account or yours, remembering that you cannot make additional contributions to an existing pension account – only an accumulation account. 2. A pension account can be setup anytime of the year. 3. Generally, all pension income received by a person over age 60 is received tax free. For people under age 60, only the tax-free portion of the income is received tax free. The taxable portion is taxed at individual tax rates minus a 15% tax rebate on the taxable portion of the income.
      Hope that helps.

      Reply
  12. Janette

    Hi Chris

    25th may 1961 is my birth date i have no intention of returning to work my partner has retired we arent married how can i access my super

    Reply
    • Chris Strano

      Hi Janette, the preservation aged for people born between 1 July 1960 and 30 June 1961 is 56 (you will need to wait until this age to access your super). A definition of retirement includes, in the case of a person who has reached their preservation but below age 60, an arrangement under which the person was gainfully employed has come to an end and that person intends to never again become gainfully employed on a full-time or part-time basis.

      Meeting a definition of retirement provides full and unlimited access to superannuation savings that have been contributed up until that point, which can be accessed in the form of a pension income stream or lump sum or both. Tax consequences of any withdrawals should be considered.

      You should contact your superannuation provider and inform them of your situation and ask them of your options. You should contact your accountant regarding tax consequences.
      Also consider the Transfer Balance Cap coming into effect from 1 July 2017 and how any other new rules from 1 July 2017 may impact your strategy…click here for an overview of new rules

      Reply
  13. Deborah

    I am 60 in May this year my question is can i withdraw all my super and continue to work part time or casual

    Reply
    • Chris Strano

      Hi Deborah
      I would suggest reading this article Can I Access My Super at 55 and Still Work? OR Can I Access My Super at 60 and Still Work?
      To access superannuation, a person needs to meet a superannuation condition of release. One such condition of release includes …”an employment arrangement coming to an end after age 60″. So if an arrangement under which a person is employed comes to an end after they reach 60, they should have full access to their super. Turning 60, in itself, does not give you full unlimited access to all of your super. Turning 65, however, does give a person full access to their super.
      Hope this helps,
      Chris

      Reply
  14. Roberta Miller

    Hi I’m 57 Australian and have around $60,000 in super I live in the USA and have become a citizen and I would like to know can I get my super out and how much tax would I have to pay

    Reply
    • Chris Strano

      Hi Roberta,
      You should find out if some or all of your balance is ‘unrestricted non-preserved’. People who contributed to super prior to 1999 are more likely to have unrestricted non-preserved components. If so, you should be able to access this portion of it. For preserved amounts, you will need to meet a superannuation condition of release, just like any person still in Australia (assuming you were a permanent resident). Generally, you need to have reached your preservation age and retired or reached age 65, amongst other less common conditions of release. Click here to find your preservation age.

      Here is the ATO webpage that explains conditions of release and accessing super. https://www.ato.gov.au/super/self-managed-super-funds/paying-benefits/conditions-of-release/

      Hope this helps,
      Chris

      Reply
  15. Brian Waters

    hi Chris,
    My wife is 58 how much can I put into her super,she has very little in it at the moment ?

    Reply
  16. Kate Ritchie

    Hi Chris,
    I am 61 and retired in 2011 and went with my husband to an overseas posting. I closed out my Super ($50k) then. I am now coming in to some money & wonder if I can start up a Super fund now I am retired. I need somewhere to put the money for my future. Thank in advance.

    Reply
  17. Lea

    Hi Chris,
    Born in 1959. Retired. I would like to access as a lump sum an amount of $15,000. From my $68,000 super. Do I pay tax on that amount please.
    Thanks
    Lea

    Reply
    • Chris Strano

      A tax free low-rate threshold is available for lump sum withdrawals up to a lifetime cap of $200,000 (indexed). This tax free low-rate threshold applies to the ‘taxable’ component of your superannuation balance only. You need to ask your superannuation provider of the tax components that make up your balance. For example, if your total balance consisted purely of ‘taxable (taxed)’ components and you have not made any previous withdrawals in your life, then the $15,000 could come under the $200,000 low-rate threshold and be received tax free. If your balance includes a ‘tax free‘ component, then that amount is received tax free and does not count towards the low-cap threshold. If your balance includes a ‘taxable (untaxed)’ component, then tax may be payable on that portion only. All withdrawals must be made proportionately from each component. Call your superannuation provider and quote your member number to ask them specifically what your tax components are and what tax would be payable on a $15,000 withdrawal.

      Reply
  18. kathy

    Hi Chris i was born in late 1962 and i have worked for the last 22years but now i want to retire and do nothing but i want to know if i can get my super before i give my notice.

    Reply
    • Chris Strano

      Hi Kathy, in order to access your super you need to have reached your superannuation preservation age and retire with no intention of returning to work. A person born in late 1962 has a superannuation preservation age of 58. Therefore age 58 is the earliest you can access your super. However, if your super balance includes any unrestricted non-preserved benefits, you may be able to access those. It is best to speak with your superannuation fund regarding this.

      Reply
  19. LENNARD PATTINSON

    Hi Chris,

    I’m 59 and retired and receiving a defined benefit PSS pension. Am I able to make a non-concessional contribution to my industry superannuation fund (not yet switched into pension phase -I’m awaiting my 60th birthday), despite receiving that PSS pension?

    Reply
    • LENNARD PATTINSON

      Oh, sorry Chris, I now see you response to an earlier query: Hi Kate, while under age 65, you are able to make contributions to superannuation without satisfying the work test. Be sure to keep contributions within the concessional contribution cap and non-concessional contribution cap.

      Reply
    • Chris Strano

      Hi Lennard, there are no restrictions on making contributions to super until reaching age 65, apart from contribution caps. Read more here.

      Reply
  20. Colin

    Hi Chris, I turned 61 in September and I intend to retire within a month. I will have a lump sum of approximately $20,000 for unused leave.My question is can I deposit the $20,000 in my pension account after I resign?

    Reply

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