There are a number of retirement rules relating to your superannuation benefits.
This article will explain the three main retirement rules that will provide you with full access to your otherwise preserved superannuation benefits.
Specifically, having the ability to access your superannuation savings in full is achieved by meeting what is known as a superannuation condition of release.
The main condition of release is ‘retirement‘, which has two separate definitions, which we will discuss in this article.
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Superannuation Retirement Rules: Retirement Definition
As mentioned, there are 2 definitions of retirement for superannuation cashing purposes while under age 65, as defined by the Superannuation Industry (Supervision) Regulations 1994, as well as 1 traditional retirement condition of release – i.e. reaching age 65.
Let’s look at each of these in detail.
Regulation 6.01(7) defines retirement as follows:
(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
(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.
Now, what does all that mean in plain English?
Regulation 6.01(7) above defines the definition of retirement for a person who is under age 65.
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First, lets go through the two definitions of retirement under regulation 6.01(7).
Superannuation Retirement Rules: Under Age 60
Australian Superannuation Retirement Rules – definition #1
Provided you have reached your superannuation preservation age, you may be able to access your superannuation savings in full under the retirement rules noted above.
Based on the legislation, retiring from work after reaching your preservation age, with no intention of returning to full-time or part-time work, signifies retirement for superannuation purposes and will give you full and unlimited access to your otherwise preserved benefits.
In this instance, you can access your superannuation savings in the form of a lump sum, an income stream, or a combination of both. Consider the Transfer Balance Cap for income streams.
If you have reached your superannuation preservation age but have not permanently retired, you should still be able to have limited access to your super under the transition to retirement (TTR) rules. Read this article – ‘Can I Access My Super at 55 and Still Work?‘
Superannuation Retirement Rules: Over Age 60, Under Age 65
Australian Superannuation Retirement Rules – definition #2
Being over age 60 does not provide you with automatic complete access to your super. However, the retirement rules for someone over age 60 are a little more lenient than a person in their late 50’s.
As stated in the legislative regulations above, you have met a retirement condition of release providing you with full access to your superannuation savings if, after reaching age 60, an employment arrangement that you had comes to end. This could be something as simple as switching roles within an organisation, moving onto a new job, or changing companies – as long as the previous arrangement comes to an end.
If you have reached age 60 but have no plans on ceasing an employment arrangement, you should still be able to have limited access to your super under the transition to retirement (TTR) rules. Read this article – ‘Can I Access My Super at 60 and Still Work‘.
Superannuation Retirement Rules: Over Age 65
Attaining age 65 provides you with full access to your superannuation savings. It does not require any employment arrangements to cease or come to an end, and you do not need to retire from the workforce.
Reaching age 65 gives you full access to your superannuation savings in the form of a lump sum, an income stream, or a combination of both. Consider the Transfer Balance Cap for income streams.
Superannuation Retirement Rules: Tax
It is important to understand the taxation of any superannuation withdrawals.
Despite common belief, being over age 60 or over age 65 does not necessarily mean you can access your superannuation tax free.
Your superannuation balance is made up of the ‘Tax-Free’ component and the ‘Taxable’ component.
You will need to contact your superannuation provider for the ratio of components that make up your specific balance.
Returning to Work After Accessing Superannuation
If you accessed superannuation under the superannuation retirement rules by retiring after your superannuation preservation age, with no intention of returning to work, as noted above; do you think you are able to return to work?
Note the word ‘intention’ in the definition.
Provided, at the time, your intention was to never return to full time or part time work, then it is quite possible your intentions will change after some time. Therefore, you are able to return to work – there is nothing stopping you.
However, this condition of release measure should not be abused. Your intention at the time needs to be genuine. Manipulating this condition of release is frowned upon by the ATO. Be cautious of Illegal Early Release Arrangements.
Also, if you do return to work, any subsequent contributions will be preserved until you meet another condition of release.
If you accessed your superannuation under the superannuation retirement rules by an employment arrangement coming to an end after age 60, then you are permitted to return to work immediately after your previous arrangement coming to an end, because this definition of retirement, as stated above, does not require the trustee to be satisfied that you never intend to return to full-time or part-time work. However, subsequent contributions to your super account will require you to meet another condition of release.
If you accessed your superannuation simply by reaching age 65, then there is no restriction on you returning to work. Furthermore, all future contributions will be automatically accessible and unpreserved.
Read about the rule changes effective from 1 July 2017.