In your 50s? The super rules that apply to you

Now you are closing in on your retirement, the rules around contributing and withdrawing your super start to change. Although the contribution caps stay much the same, these years are your last chance to make super contributions without having to meet the work test that starts to apply from age 65.

When it comes to accessing your super account, if you decide to withdraw your super now, you will generally pay more tax than if you wait until you reach age 60.

The rules that apply to your super during your 50s are split between those covering when money goes into your super account (contributions) and when it comes out (withdrawing).

1. Contributing to super

Superannuation Guarantee (SG)

If you are aged over 18 and being paid $450 or more (before tax) in a calendar month, your employer must pay SG contributions (9.5% in 2019/20 and 2020/21) into your super account. Once you meet these conditions, super is payable for all employees whether you are working full-time, part-time or are casually employed.

If you don’t meet these conditions, your employer is not required to make SG contributions for you.

If you are a contractor paid ‘wholly or principally for labour’, you may be considered an employee for super purposes and entitled to SG payments.

For more information, see SuperGuide articles:

• Your simple guide to Superannuation Guarantee (SG) contributions
• Superannuation Guarantee rules for employers
• What to do if your employer doesn’t pay your super

Contributions caps

There are annual limits or caps on the amount of money you and your employer can contribute into your super account.

From 1 July 2017, the general concessional (before-tax) contributions cap is $25,000 for everyone, regardless of their age. (From 1 July 2018, you can also make ‘carry-forward’ concessional contributions if you qualify, which includes having a Total Super Balance of less than $500,000.)

Your non-concessional (after-tax) contributions cap is $100,000, or $300,000 over a three-year period if you use the ‘bring-forward’ rule (in 2019/20 and 2020/21).

You still don’t need to meet a work test to make a non-concessional contribution in your 50s, but your Total Super Balance must be under $1.6 million.

For more information, see SuperGuide articles:

• 2020/21 guide to concessional contributions (before-tax super contributions)
• 2020/21 guide to non-concessional contributions (after-tax super contributions)
• A super guide to understanding the bring-forward rule

Personal (or voluntary) tax-deductible super contributions

From 1 July 2017, most people in their 50s – whatever their employment status – are able to claim a tax deduction for any personal voluntary contributions they make into their super account.

If you’ve got cash to spare and would like to boost your retirement savings, making a tax-deductible voluntary super contribution can be a great way to do it in the latter years of your career.

For more information, see SuperGuide article How do tax-deductible superannuation contributions work?.

Self-managed super funds (SMSFs)

For many people in their 50s, it could be worth thinking about establishing your own SMSF if you are interested in taking more control of your retirement savings. However, it’s important to remember that SMSFs must adhere to lots of rules and you will have the ATO looking over your shoulder.

An SMSF can have no more than four members at any one time. A member cannot be an employee of another member unless they are related.

You cannot be a trustee of an SMSF is you have been convicted of an offence involving dishonest conduct, been subject to a civil penalty under super law, are insolvent or an undischarged bankrupt, or been disqualified from acting as a trustee of a super fund.

For more information, read SuperGuide article What is a self-managed super fund (SMSF)?

2. Withdrawing your super

Getting your money

To access your super, you need to have both reached your preservation age and met a condition of release.

If you are in your 50s, your preservation age will be between 55 and 59 if you were born before 1 July 1964.

For more information, read SuperGuide articles:

• What age can I access my super (Preservation Age)?
• When can I access my super? All the conditions of release explained
• Early release of super on compassionate grounds
• Your tax guide to accessing your super under age 60

Hardship, compassionate and COVID-19 provisions

If you are in your 50s, it’s possible to access some of your super early if you are suffering severe financial hardship, provided you meet strict eligibility conditions.

You can also apply for early release based on compassionate grounds.

On 22 March 2020, the federal government also announced a temporary measure allowing individuals impacted by COVID-19 to withdraw up to $10,000 in 2019/20 and a further $10,000 in 2020/21. This temporary withdrawal rule also has strict eligibility criteria.

For more information, read SuperGuide articles:

• Early release of super due to severe financial hardship
• Early release of super on compassionate grounds
• Early release of super due to COVID-19 (coronavirus)

Paying tax on your super

If you decide to access your super benefits during your 50s, you will pay a higher rate of tax on your money than if you wait until you turned 60.

It’s also important to note that you will pay different rates of tax on your super benefit if you access it when you are under your preservation age, compared with accessing it if you are over your preservation age but under age 60.

For more information, see SuperGuide article Your tax guide to accessing your super under age 60.

Taking a super pension

If you decide to start a super pension, you will be required to withdraw a minimum amount each year based on your age.

For more information, see SuperGuide articles:

• Starting a pension from your super
• Minimum pension payments for 2020/21 (including calculator)

Transition to retirement pensions

At this stage of life, it may be worth considering starting a transition to retirement (TTR) income stream as you move towards retirement. This type of super pension allows you to gradually draw on your super benefits while you’re still working.

For more information, see SuperGuide articles:

• Guide to transition to retirement pensions (TTRs or TRISs)
• Did tax kill the transition to retirement magic pudding?