The definition of retirement for superannuation is arguably the most important definition of any superannuation term.
After all, the main reason for having superannuation is to receive tax concessions on investment earnings, provided we don’t access our super until certain conditions are met.
The most common definition relating to accessing superannuation is the definition of retirement.
Interestingly, despite the definition of retirement for superannuation purposes having remained the same for many years now, it still manages to create confusion.
Advisers and individuals alike are hesitant to access their superannuation prior to retirement to avoid contravening the superannuation retirement rules.
This is what makes the definition of retirement for superannuation so important.
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Definition of Retirement for Superannuation
As defined by Regulation 6.01 of the Superannuation Industry (Supervision) Regulations 1994; the definition of retirement for superannuation purposes is (source: AustLII):
(7) ….the retirement of a person is taken to occur:
(a) in the case of a person who has reached a preservation age that is less than 60–if:
(i) an arrangement under which the member was gainfully employed has come to an end; and
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis; or
(b) in the case of a person who has attained the age of 60–an arrangement under which the member was gainfully employed has come to an end, and either of the following circumstances apply:
(i) the person attained that age on or before the ending of the employment; or
(ii) the trustee is reasonably satisfied that the person intends never to again become gainfully employed, either on a full-time or a part-time basis.
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Definition of Gainful Employment
As per Superannuation Industry (Supervision) Regulations 1994 1.03, the definition of Gainful Employment for superannuation is:
…employed or self-employed for gain or reward in any business, trade, profession, vocation, calling, occupation or employment.
The definition of full-time is:
…in relation to being gainfully employed, means gainfully employed for at least 30 hours each week.
The definition of part-time is:
…in relation to being gainfully employed, means gainfully employed for at least 10 hours, and less than 30 hours, each week.
Ceasing an Employment Arrangement On or After the Age of 60
Establishing whether gainful employment has ceased can be defined as having an employment arrangement come to an end.
Ceasing an employment arrangement on or after the age of 60 can convert your preserved superannuation benefits into unrestricted non-preserved benefits, providing you with full access to your retirement savings.
Importantly, ceasing an employment arrangement on or after age 60 will only provide access to superannuation savings that have accumulated up until the day that you had an employment arrangement come to an end.
Any subsequent contributions made to superannuation by you or on your behalf will be preserved until another superannuation condition of release is met (e.g. retirement (again) or reaching age 65).
Click here for some examples of ceasing an employment arrangement on or after age 60.
Generally, all withdrawals and pension income received from super will be tax free over age 60, which is why many people see this as the best age to retire in Australia.
Can I Access My Super and Still Work?
Returning to work after accessing superannuation is possible even if you have met the definition of retirement.
Definition of Retirement – 7(a)
If you accessed your super by reaching your superannuation preservation age and retiring with no intention of returning to work; it is possible for your intentions to change.
Provided your intended retirement was genuine and followed through with, there is nothing to say that you change your mind at sometime in the future and decide to return to work.
If so, any additional contributions, after you return to work, will remain preserved, until you again meet the definition of retirement or reach age 65.
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In this instance, people often ask how long you need to wait after your retirement before deciding you no longer want to be retired.
There is no mandated time frame. What’s important in such a situation is that you had genuinely intended to retire and not return to full-time or part-time work at the time of retirement and your circumstances reflected such intentions at that time.
Definition of Retirement – 7(b)
If you accessed your super by ceasing an employment arrangement on or after age 60, you are able to commence a new employment arrangement or become gainfully employed as soon as you like after ceasing the arrangement.
Again, any subsequent contributions made to your account after having the employment arrangement come to an end will remain preserved until you meet another condition of release.