Overview
We often get questions from intermediaries about clients who have turned 60, left an employment arrangement, but will continue to work in some capacity, be it full time or part time. Below we outline the route to accessing superannuation for members aged 60, but less than 65, who are not permanently retiring from the workforce.
Ceasing a gainful employment arrangement after 60th birthday
The conditions of release and the preservation status of benefits are beyond the scope of this article. However, it is important to note that as at 1 July 2024, everyone either now has a preservation age of either 60, or for those with a preservation age of less than 60, they have now also turned 60 or are older.
Unfettered access to super benefits for persons who have reached age 60 and still working can occur, however, under the second tranche of the ‘retirement’ condition of release located in Regulation 6.01(7)(b) of the Superannuation Industry (Supervision) Regulations of 1994.
‘Retirement’ of a person is taken to occur:
(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.
This means members aged between 60 and 65 can leave an employment arrangement, meet a ‘retirement’ condition of release, and access their superannuation benefit as a tax-free lump sum, tax-free pension, or a combination of the two.
Furthermore, a member who has more than one genuine employment arrangement can retire from one of those arrangements after age 60 and still meet the definition of retirement, whilst retaining another genuine employment arrangement. This means the member’s accumulated benefit at that point in time will be fully accessible to them tax free.
Case Study
Theo has reached age 60 and has two employment arrangements – one with Hercules Pty Ltd, where he works part-time artist model and one with Dennett Pty Ltd, where he works full-time as an English translator. He has $675,000 in his SMSF, currently all a Preserved benefit.
He is tired of being a male model and decides to cease this employment arrangement. At that point in time, all of Theo’s benefit in his SMSF becomes Unrestricted Non-Preserved, which means he can access it as an account-based pension, tax-free lump sum, or a combination of the two.
Theo decides to undertake a re-contribution strategy as his benefit consists of a taxable component, and he wants to increase the tax-free component by cashing out his benefit tax free and re-contributing it back to the fund as a non-concessional contribution (NCC).
Theo can do this, but he needs to remember that any contributions to the fund will again be Preserved until he satisfies a subsequent condition of release.
Conclusion
The retirement condition of release for a member who has reached age 60, and an arrangement under which they were gainfully employed has come to an end after they reached age 60, can access their super benefit. However, there are nuances to take into consideration, as not fully understanding the rules can have adverse consequences. Notwithstanding, that fact, having a nil cashing restriction condition of release does avail superannuants a range of strategies that can benefit them in retirement, or provide benefits to the member’s dependants or legal representatives after the member’s death.
What does Neo Super provide?
We are an innovative end-to-end SMSF service provider specialising in:
- SMSF administration and compliance
- Documentation services, including fund establishment, borrowing arrangements and pension documentation
- White label documentation and services for Intermediaries such as accountants and financial planners
- SMSF technical support, education, and training.
Further Information
For other service requirements, please contact our office at neo@neo-super.com.au or 1300 083 428.
