Retirement, in a superannuation sense, is defined at SIS Regulation 6.01(7) which states:
“For the purposes of Schedule 1, 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.”
To put it simply, there are two definitions of retirement which are dependant on your age.
If you are under 60 years of age
If you have worked hard enough to be looking at retiring before 60, there are two stipulation you must meet before you van access your superannuation benefits. Firstly, you will need to have reached your preservation age and secondly, have no intention of working again – either full time or part time.
Your Preservation age is a sliding scale dependant on your date of birth as shown:
|Date of Birth
|Before 1 July 1960
|1 July 1960 – 30 June 1961
|1 July 1961 – 30 June 1962
|1 July 1962 – 30 June 1963
|1 July 1963 – 30 June 1964
|After 1 July 1964
If you have reached preservation age and no longer wish to continue working again, you will need to make a declaration to your SMSF confirming your intention to retire permanently and not to re-enter the workforce.
If you are over 60 years of age
Retirement is much easier once you are over 60. You no longer need to declare you have permanently retired and are able to return to the workforce at any time. For example, when you turn 60 you are able to retire from Workplace 1 Pty Ltd on 30 March and then start a new job with New Workplace Pty Ltd on 7 April without impacting your retirement status in your SMSF.
But what if I’m under 60 and need to return to work again?
Despite the declaration that you had no intent of returning to work, the legislation allows for circumstances to change. Should you need or want to return to the workforce you can, the only change is that any new contributions received, be they employer or personal, will remain restricted until you meet a condition of release again.
Can I contribute still if I retire?
As with retiring, this is dependent on age. If you are under the age of 67 there is no restrictions on contributions. In fact, a common strategy is to recontribute excess pension funds back to the SMSF to increase any tax free components while potentially maintaining your balance within the SMSF.
Once you are over 67, you will need to meet a work test each year in order to contribute to the fund. To pass the work test you will need to have worked a minimum of 40 hours in a maximum 30 day period. You also need to have been paid for you work – unfortunately volunteering does not count.
If you are 75 or over, the only contributions that the SMSF can accept are any employer superannuation guarantee payments.
What do I need to do?
If you are looking at retiring, please contact us! We can prepare of all the documentation required to confirm your retirement and commencement of any pensions.
We are also able to calculate minimum pension drawdown amounts and lodge any Transfer Balance Account Reports (TBAR) with the ATO for your SMSF.