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How can I get my super but not retire?

Paul Rickard
Friday, December 21, 2018

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I am surprised at how often I get asked this question, which I guess is a sign of the times with an ageing workforce and many mature age workers expressing a clear preference to keep working. 

There are three key ages when it comes to accessing your super. 65 years old, 60 years old and your “preservation age”. I  won’t dwell too much on the “preservation age” because for most people it is also 60 years. If you were born before 1 July 1960, it is only 55 years. There is a transitional scale from 56 years to 59 years for those born on or after 1 July 1960 up to 30 June 1964, and after that, it is 60 years.  

65 years is “magic” because this the age when there are absolutely no restrictions about accessing your super. You can withdraw by lump sum as much or as little as you want, or commence a regular pension, even if you are working full-time.

60 years is “special” because this is the age when withdrawals from super by lump sum or regular pension will generally be tax free. If you are in an older style defined benefit scheme, you may have some tax to pay, but for most of us, withdrawals will be tax free.

Turning 60 also opens up the opportunity to access your super without retiring. There are two ways.

Firstly, you can commence a transition to retirement pension and access part of your super. (It is also available if you reach your preservation age at an earlier age). Introduced by the Howard government some years ago with the aim of allowing people to scale back on their work commitments and ease into retirement without too much financial pain, it comes with several rules.

You can’t take a lump sum withdrawal and you must open an account-based pension. You are then required to take a minimum of 4% of your account balance as a pension each year, and a maximum of 10%. For example, if your super balance is $500,000 and you start a transition to retirement pension, you must take at least $20,000 as a pension payment each year and you can’t take more than $50,000.

Pension payments can be made as often as you want (fortnightly, monthly, quarterly or just once a year etc), and if you commence a pension during the financial year, the minimum and maximum amounts are prorated (for example, if you start a pension midway through the financial year on 1 January, the minimum and maximum amounts are half the full year amounts).

You can continue to work full or part time and make super contributions as normal. These contributions will  be kept separately from the balance you used to start the transition to retirement pension.  

When you turn 65, you can either take the monies out as a lump sum, or just keep it as a normal account-based pension. One important change at that time is that the investment earnings on the assets supporting the payment of the pension will become tax free (inside a transition to retirement pension, they are taxed at 15%).

The other way to access your super when you turn 60 is to cease an employment arrangement (e.g. quit your job). Potentially, you can access all your accumulated super benefits to that point of time, either as a lump sum or use to start an account-based pension. If you continue in another employment arrangement, or start a new job, the contributions that you or your employer make will be kept separately in the accumulation part of the super system.

The point to note here is that there is no need to retire – simply the act of ceasing an employment arrangement after reaching age 60 allows you to access your accumulated super.

If you do decide to retire, it doesn’t mean that you can’t work at all. The super laws define “retirement” for a person over 60 as having no intention again to be “gainfully employed”, either on a full-time or part-time basis. Part-time means working up to 30 hours a week and a minimum of 10 hours per week. So, potentially you can retire and start a new position provided you work just short of 10 hours per week. And if you retire and decide that you’re not cut out for retirement or your financial circumstances change, you are not locked out of the super system for ever. It’s an “intention”, rather than a permanent  commitment.

Finally, for completeness, you can also access your super early in the event of a terminal medical condition, severe financial hardship and on compassionate grounds, but hopefully, these won’t apply to you. 

Published: Friday, December 21, 2018

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