The superannuation system was established to assist individuals with their retirement plans and so, for the majority of us, our superannuation benefits are ‘preserved’. This means our super is not accessible until certain requirements are met. These requirements are called a ‘condition of release’.
What are some common conditions of release?The common conditions for accessing your preserved superannuation are as follows:
- When you retire after the age of 55 (if you’re born before 1 July 1960)
- When you retire between the ages of 55 and 59 (if you’re born between 1 July 1960 and 30 June 1964)
- Ceasing work between ages 60 and 64
- When you turn 65 years old
- Where you become incapacitated or suffer ill-health
- If you reach ‘preservation age’ (explained below) and start a ‘transition to retirement income stream’
What age do I need to retire?
Typically, access to super is not granted until you have reached your ‘preservation age’. This is generally the earliest age at which you can start to withdraw your super and, depending on your date of birth, will fall between ages 55 and 60. The table below will help you determine what your preservation age is:
So for instance, if you were born 1 December 1962, you wouldn’t reach your preservation age (58 years) until 1 December 2020.
Can I access all of my super I have reached my preservation age?
Once you reach your preservation age, the requirements to have full access to your super benefits are slightly different depending on how old you are.
If you’ve reached preservation age but are under 60: You may withdraw your super money once you have retired from the workforce.
If you’re between 60 and 64: Once you reach 60 years, you are not required to retire – all you need to do cease an employment arrangement. For example, if you had two paid jobs, then upon turning 60, you could resign from one job and access your super even though you would still be working for your other employer.
Now that I have full access to super, how do I withdraw it?
Once you have full access, you have two options: You can either take your super out as a lump sum, or you may wish to commence an income stream called an account based pension. This latter option has an annual minimum payment amount, which varies depending on your age and your account balance. There are tax consequences and strategy opportunities for both methods, which you can discuss with your adviser when you seek out help with your SMSF.
I am at preservation age but still working. Can I start a ‘transition to retirement income stream’?
Once you have reached your preservation age, it is possible to access your super without retiring or ceasing an employment arrangement. However, the benefits can only be accessed as a non-commutable income stream called a ‘transition to retirement income stream’. The intention here is to allow individuals who are scaling back their working hours (and their salary) to access their super to help fund the gap in their income.
There are prescribed annual minimum income levels for transition to retirement income stream payments. The minimum payment level depends on your age and your account balance, similar to an account based pension. However, if you are receiving this stream, a prescribed maximum payment amount will apply. This is calculated as 10 per cent of your account balance at commencement, and then at at each subsequent 1 July.
If you have commenced a transition to retirement income stream, once you have reached age 65, retired or ceased work after age 60, this income stream will no longer have a maximum payment amount.
What happens when I reach age 65?
Once you have reached age 65, you have complete access to all your superannuation monies. You can access your benefits via lump sums or via an account based pension.
What happens if I become sick or incapacitated?
Where someone suffers permanent incapacity, they are unable to engage in employment for which they are qualified. Therefore, in this instance, they are generally able to have full access to their preserved benefits before reaching preservation age. Also, for members suffering temporary incapacity, there is an ability to receive a non-commutable income stream where certain conditions are met. In addition, full access to super benefits will be granted where a member has been diagnosed with a terminal illness and specific requirements have been met.
