This article explores what it means to ‘retire’ from a superannuation perspective and so to access your superannuation funds.
Whether you can access your superannuation funds when you leave a job or retire depends on a range of factors.
The levels of accessing your superannuation are referred to as ‘preservation’. All contributions and earnings from 1 July 1999 are fully preserved, meaning they cannot be accessed until you meet a condition of release that has no cashing restriction. Superannuation may also be classed as unrestricted non-preserved and restricted non-preserved. Depending on the rules of the superannuation fund, the former may be accessed whenever and the latter has specific conditions of release, outside the topic of this article.
Conditions of release
Conditions of release are the triggers which change the preservation status of your superannuation funds, and so make them accessible to you (or not).
In addition to the less common conditions of release such as death, a terminal medical condition or permanent incapacity, conditions of release include:
- Retirement from preservation age
- Retirement from age 60
- Attaining preservation age and beginning a transition-to-retirement (TTR) income stream (see below)
- Leaving your job after the age of 60.
- Reaching age 65 (regardless if you are working or retired).
Transition to Retirement (TTR) income stream
A TTR income stream is a non-commutable superannuation income stream that can be commenced once you reach your preservation age. This allows you to supplement other income and gradually reduce the number the number of hours you work until another full condition of release is met, allowing you to fully access your superannuation – either as a commutable income stream or lump sum.
From 1 July 2017, earnings from the underlying assets in a transition-to-retirement income stream are taxed at 15%, the same tax rate that is applied to superannuation fund earnings in accumulation phase. Previously, earnings on these assets were tax-exempt.
However, when you subsequently meet the retirement condition of release, a TTR income stream will convert to a retirement phase income stream and, so obtain the earnings tax exemption. You would need to notify the trustee of your fund to make this declaration.
Retirement – Reached preservation age, but less than age 60
In this case ‘retirement’ occurs if you have reached your preservation age and:
- an arrangement of gainful employment has come to an end at any time in the past; and
- the trustee of your superannuation fund is reasonably satisfied you have no intention of being gainfully employed again in the future for more than 10 hours per week.
Gainful employment is broadly defined to include any employment or self-employment arrangement where a person is financially rewarded for personal exertion. It therefore excludes volunteer or charity work you may want to do in the future.
Preservation age for anyone born after 30 June 1960 is age 56. Preservation age is gradually increasing to be age 60 for everyone born from 1 July 1964 onwards.
Retirement – Age 60, but less than age 65
The retirement condition is satisfied for those over age 60 where:
- an arrangement of gainful employment has come to an end on or after age 60; or
- the trustee of your superannuation fund is reasonably satisfied you have no intention of ever being gainfully employed for 10 hours per week or more.
So, as you can see above, the age you retire has a significant impact on whether you can access your superannuation benefits.
Once a retirement condition of release has been met all superannuation benefits at that point in time become un-restricted non-preserved and so can be fully withdrawn from the superannuation system, or commence an income stream. This is the case, even if you change your mind in the future and end up returning to work for more than 10 hours per week due to a change in circumstances or deciding retirement isn’t for you yet.
Any future superannuation contributions you make in your subsequent gainful employment must be preserved until you meet another condition of release in the future.
If you have never been gainfully employed before, the retirement condition of release cannot be utilised to access the preserved benefits in your superannuation. Another condition of release, such as age 65 would need to be triggered in order to access superannuation.