In Australia, the superannuation retirement rules determine the accessibility of your superannuation. These apply to three distinct groups of people: under 60, over 60 and under 65, and over 65.
When and how you acquire your superannuation depends on which category you fall in. The information below will help you plan your retirement income in preparation for your golden years ahead.
How does superannuation work when you retire?
You may be able to access your super when you reach the preservation age and you retire, or start a transition to retirement TTR. Your Super Preservation Age is when you are able to have full access to your superannuation savings. This varies from age 55 to 60. Age 65 is considered a superannuation condition of release and whether you are working or not, you will get unlimited access to your superannuation benefits.
Super Rules: When you retire under 60
If you’ve reached your preservation age but have not permanently retired, you will only have limited access to your super under transition to retirement. If you meet this category, you will enjoy unlimited access to your super after retiring, under Regulation 6.01(7) with no intention of working.
Regulation 6.01(7) of the Commonwealth Consolidated Regulations, a person who has reached a retirement age that is less than 60 would be considered retired if:
- an arrangement under which the member was employed has come to an end; and
- the trustee is satisfied that you won’t get employed, either on a full-time or a part-time basis.
Also, take into account that it is also possible for you to apply to get your super early under a few circumstances:
- Severe Financial Hardship but you will only be eligible if government support payments for 26 weeks.
- Compassionate Grounds: See early access when faced with certain expenses that you have no other way of paying, for example, footing medical bills.
Super Rules: Over 60 but under 65
Once your employment comes to an end, you will be eligible for unlimited access to your super. If you switched roles within an organisation or moved into a new job, you can get your superannuation. But if you have not ended an existing employment agreement but have reached age 60, you can still have limited access to your super under the TTR income rule.
Super Rules: Retiring Over 65
If you’re over 65, there are caps to your maximum concessional contributions and non-concessional contribution (bring forward rule).
Your concessional contributions cap will include your employer’s contribution and your voluntary super contributions through salary sacrificing. This may be higher than AUD 25,000 if you’re eligible. But the non-concessional cap may include the after-tax contributions that you don’t claim a tax deduction on. When you reach an age over 75, you’re ineligible to make voluntary contributions to your super account.
Rules on Tax
Your super fund balance is composed of Tax-Free and Taxable components. So even if you’re over age 60 or over 65, you can access your super but it doesn’t mean tax-free. Your super fund provider can give you the details of your super and sound financial advice on tax rules that govern superannuation.
You can also visit the Australian Taxation Office website for more financial information about tax and super funds. To back up your retirement plans, you can see personal financial advice from professionals to provide help on how to spend your retirement savings and get other account-related advice.
Calculating Your Superannuation
To determine how much super funds you are entitled to, multiply your gross salary and wages by 9.5%. For example, if you earn AUD 50,000 gross salary per quarter, multiply it by 9.5%, giving you AUD 4750 per quarter.
You can have up to AUD 252,500 in assets in your super account before it affects the pension you receive. Once you exceed this account limit, your pension is reduced by AUD 1.50 for every AUD 1000 from your super every two weeks.
Can You Return to Work After Getting Your Super?
As mentioned in the above information provided, accessing your super contributions is possible whether you’re retired or not, once you reach age year 65. You can continue working or retire and return to work whenever you want to. If you are under 60, the only way of accessing your money is once you have retired. For those over 60 but under 65, you can get your money and don’t need to fully retire, which means you can continue working and return to work whenever you want to. You only need to stop an existing employment arrangement to satisfy a condition of release.
You can also make a personal super account contribution to your super fund after-tax although this is different from the contributions your employer makes. Depending on your age when you made the contribution, you may have to do a work test or meet its exemption criteria for your super account fund to accept the contribution. To fulfil the work test, you must work at least 40 hours, you must take into account the following criteria:
- You must have a super balance of less or more than AUD 300,000 at the end of the previous income year
- You’re not dependant on the test the previous financial year
Understanding the superannuation retirement rules can help you plan very well for your income stream in retirement. This can help you avoid running out of money in your retirement, see how much risk you should take in case you are considering retirement income, and how much more you need to top up on your superannuation balance to have a fulfilled retirement over the years.
Make sure to browse through Aged Care Weekly for advice and information on retirement, planning, and pension, and more. You can also sign up with your name, email address, to get additional help and information on aged care.