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Retiring today is not like the old days when you left a job and never looked back. These days Australians are fitter, more active and interested in new experiences and learning.
Some people even decide to head back to the workforce after a few years in retirement. This could be due to the pandemic, or just finding they don’t have enough saved to enjoy the retirement they planned.
But retirement can have an important impact on your super, so you need to be aware of the rules applying to your particular circumstances.
Why add to your super after retiring?
Contributing to your super account after you’ve retired can be a rational decision as, for most people, super savings are taxed at a lower rate than normal income outside the super system.
And if you draw an income stream from your super account, it may even be tax free, so continuing to save through super can make sound financial sense.
If I retire, when can I access my super?
You can retire from the workforce at any age you want. But when it comes to withdrawing some or all of your super benefits, generally the earliest you can access your money is when you reach your preservation age AND formally retire.
The preservation age for Australians born before 1 July 1960 is 55 years, while anyone born on or after this date has a preservation age of between 56 and 60.
Date of birth Preservation age Before 1 July 1960 55 1 July 1960 – 30 June 1961 56 1 July 1961 – 30 June 1962 57 1 July 1962 – 30 June 1963 58 1 July 1963 – 30 June 1964 59 From 1 July 1964 60
Once you reach your preservation age and decide to access your super benefits, you need to make a written declaration to your super fund that you have a genuine intention to retire. This means you plan to leave the workforce permanently and don’t expect to work more than 10 hours per week again.
How does retiring affect my ability to make more super contributions?
Employment has always been closely linked to saving for retirement in Australia’s super system, so being employed is one of the key eligibility criteria for making super contributions.
With one or two exceptions, if you aren’t working you are generally not eligible to make super contributions. This is the reason the work test and work test exemption become so important when making super contributions in your late 60s.
Once you have made a written declaration to your super fund that you are officially retired, your ability to make further contributions into your super account is much more limited.
If you are not working and are:
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1. Aged 66 and under you can still make:
- Salary sacrifice
- Personal contributions for which you claim a tax deduction
- Non-concessional (after-tax) contributions
- Spouse contributions
- Downsizer contributions (only from age 65)
To make non-concessional or spouse contributions you must have a Total Super Balance (TSB) of less than $1.6 million on 30 June of the financial year before the one in which you want to make you contribution.
2. Age 67 to 74, you can generally only make downsizer contributions.
If you only recently retired from the workforce, you may be able to satisfy the one-off work test exemption to still make personal contributions or receive spouse contributions in the financial year immediately after your retirement.
This only applies if your TSB is less than $300,000 at the start of that financial year.
What if I return to work after retiring?
Just because you’ve retired, doesn’t mean you’ll stay there. Transitioning to retirement is no longer a one-way street, with many retirees now deciding they want to re-enter the workforce at a later date.
It’s perfectly okay to start making super contributions again if you have retired, but later change your mind and re-enter the workforce.
That includes if you have made a written declaration to your super fund you intended to retire and have taken a lump sum super payout, or are receiving ongoing payments from your super fund.
An easy way to start making super contributions is to open a new accumulation account with your old super fund for your super contributions.
If you have made a retirement declaration to your super fund, you will need to show your personal circumstances have changed and you are required to return to work.
You must be able to prove that at the time you retired and first accessed your super benefits your intention was to retire and never work either part-time or full-time more than 10 hours a week. (Part time is defined as more than 10 hours and up to 30 hours a week. Full time is defined at more than 30 hours a week.)
If you ceased working after age 60 and triggered a condition of release for your super, you can access your super benefits without needing to declare your retirement, so there are no issues with you returning to work and then restarting your contributions.
If you are returning to the workforce after retirement and plan to restart making super contributions, it’s sensible to get in touch with your super fund to discuss your new situation.
It’s also worth noting that you could be required to prove to the ATO or APRA that your intention to retire was genuine and you did not take your super benefits while planning to return to work in the future.
Boosting your super after returning to work: What contributions can I make?
If you return to work after being retired, the rules for making a contribution into your super account are the same as for anyone else and they mainly depend on your age and TSB:
1. Aged under 67
Permitted super contributions include:
- SG, industrial award or arrangement and salary sacrifice contributions
- Personal contributions for which you intend to claim a tax deduction
- Personal non-concessional (after-tax) contributions
- Spouse contributions
- Downsizer contributions (from age 65 only)
2. Age 67 to 74
Permitted super contributions include:
- SG, industrial award or arrangement and salary sacrifice contributions
- Personal contributions for which you intend to claim a tax deduction
- Personal non-concessional (after-tax) contributions
- Spouse contributions
- Downsizer contributions
3. Age 75 and over
Permitted contributions include:
- SG, industrial award or arrangement contributions
- Downsizer contributions
How do I make new super contributions?
There are no rules about how much you can earn if you return to work after retirement and want to contribute to your super account.
Once you return to work and earn over $450 a month, however, your employer must make SG contributions on your behalf into your super account.
If you or your new employer start making fresh contributions into your super account when you return to work, it’s a good idea to contact your super fund to explain your changed situation.
If you closed your super fund account on retirement and took a lump sum, you are generally free to open a new super account with a super fund of your choice.
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