In the hype and hoopla surrounding the rules relating to superannuation – in particular, tax-free super benefits for over-60s, many of the websites in the super space forget to mention the magic words ‘preservation rules’.
The rules surrounding when and how you can access your super have not changed for many years. You cannot access your preserved super benefits unless you satisfy a condition of release, such as retiring, or reaching the age of 65, or starting a super pension under the transition-to-retirement pension rules.
If you were a member of a super fund before July 1, 1999, you may have some ‘unpreserved’ benefits, which mean you can access them at any time. You can check whether you have this type of benefit with your super fund, or adviser if you have one.
Retirement after reaching preservation age
The most common condition of release is retirement, provided you have reached your preservation age. Preservation age has moved to 59 years (although at the time of writing, Australians currently aged 56 (some), 57 or 58 years, have preservation ages younger than 59 years). Preservation age is 55 years for anyone born before July 1960. Preservation age is at least 56 years of age for any one born on or after 1 July 1960, and at least 57 years for any person on or after 1 July 1961, and 58 years for any person born on or after 1 July 1962 and before July 1963. Preservation age is 60 years for those born on or after 1 July 1964. For more information on your preservation age, see the following SuperGuide articles:
- Accessing super: What is my preservation age?
- Retirement Age Reckoner: Discover your preservation age and Age Pension age
- Accessing super: Preservation age moves to 59 years
- What is the retirement age in Australia?
Transition-to-retirement pensions (TRIPs): If you have reached your preservation age, you have the option of starting a transition-to-retirement pension (TRIP), which gives you access to your super benefits while you are still working. If you are taking a TRIP and you are over the age of 60, your pension benefit payments will be tax-free although the earnings on assets financing the income stream are now subject to 15% earnings tax (before July 2017, earnings on TRIP assets were exempt from tax). There are also stricter rules on the amount you can withdraw from TRIPs, compared to other types of pensions. You also cannot commute such a pension to a lump sum, unless you retire or reach the age of 65. For more information on TRIPs, see SuperGuide articles TRIPs: 10 important facts about transition-to-retirement pensions and Less tax, more super? A transition-to-retirement pension is no longer the answer. For more information on super pensions generally, see SuperGuide article Retirement: What types of superannuation pensions are available?.
Turning 65 and accessing super
If you’re aged 65 years or older, you don’t have to retire to access your super benefits. The age of 65 is considered a condition of release for the purposes of accessing super. For more information, see the following SuperGuide articles:
- Turning 65 and super: A Super Guide
- Age 65: Accessing your super is a right
- I’m 67. Can I access my super and continue working?
Turning 60 and special access rules
Another condition of release relates specifically to those over the age of 60. When a member has reached aged 60, he or she will be considered retired when an arrangement under which they were gainfully employed ceases. An individual who is aged 60 and continues working (with the same employer) with no intention of retiring cannot be considered “retired” for the purposes of accessing super benefits. An individual in these circumstances would need to terminate an employment arrangement. For more information on this issue and other issues when considering retiring at 60, see the following SuperGuide articles:
- Does changing to part-time at 60 years, count as ‘retiring’?
- I’m 60. Why can’t I access my super benefits?
- If I retire before 60, when can I access my super?
Other conditions of release
You may also be able to access your super early in other limited circumstances, for example, if you are suffering severe financial hardship, or on compassionate grounds (strict requirements) or due to permanent disability. For information on this, see the following SuperGuide articles:
- Can I access my super early due to financial hardship?
- Accessing super early on ‘compassionate grounds’
- Can I access my super early because of my disability?
You can read about the other ways to access your super benefits in the SuperGuide article Accessing super early: 14 legal ways to withdraw your super benefits.