Question of the month

Ceasing casual employment arrangement on or after age 60

Article published on: 21-07-2023

My client (age 62) has two jobs with two different employers. They include a part time role working 20 hours per week and a casual role working seven hours per week. Can they access their super if they cease their casual employment arrangement?

Answer

Yes. The client has terminated an employment arrangement (full time, part time or casual) on or after attaining age 60. This allows them to access their super benefits. The future employment intentions of the person are irrelevant. Amounts held in super at the time of ceasing employment become unrestricted non preserved.

Any earnings in accumulation phase and any new contributions after cessation of employment will be preserved. A subsequent condition of release must be satisfied to release these amounts (with the exception of a transition to retirement pension).

Let’s assume the client had $400,000 in their super fund at the time the casual employment arrangement ceased. Two months later they inform their super fund they have satisfied the cessation of a gainful employment arrangement condition of release. During the two months, the fund balance has grown to $420,000 (with growth and additional employer contributions).

Once the trustee is satisfied the retirement condition of release has been met, $400,000 will become unrestricted non-preserved and accessible to the client (eg can take a lump sum or commence a retirement phase account-based pension). The remaining $20,000 representing growth and contributions occurring after cessation of employment remains preserved.

If the client wishes to commence a retirement phase account-based pension (providing the benefit of tax-free investment returns and no maximum pension payment), they will need to instruct the super fund to commence an account-based pension with the $400,000 non-preserved benefits only. If they use $420,000 to commence a pension, the commencement value would include preserved benefits and the pension would be a transition to retirement pension (investment returns are taxed at up to 15% and a 10% maximum pension payment applies).

Background

From age 60, the most common conditions of release for super are:

Ceasing a gainful employment arrangement on or after age 60. If a client ceases a gainful employment arrangement on or after age 60, they have satisfied a condition of release and can access all their super benefits at the time the employment has ceased (fund rules permitting). There is no minimum hour requirement for the employment arrangement that has ceased. Therefore, ceasing a casual employment arrangement on or after age 60 will satisfy this condition of release for this client.

Attaining preservation age and permanently retiring. Permanent retirement occurs where a client has reached preservation age, ceased a gainful employment arrangement (at any time) and never again intends to return to gainful employment of at least 10 hours per week. This client cannot satisfy permanent retirement as they are continuing their part time employment of 20 hours per week.

Attaining age 65. When a member reaches 65 years of age, their entire super benefit becomes unrestricted non-preserved. This includes current funds, future contributions and any earnings. If the member has a TTR pension, it becomes a retirement phase pension and counts towards their transfer balance cap. Care needs to be taken to not exceed their personal transfer balance cap (TBC) on their 65th birthday.

To find out more, refer to our Guide to accessing super.

This communication is prepared by Actuate Alliance Services Pty (ABN 40 083 233 925, AFSL 240959), a related entity of MLC Wealth Limited (ABN 97 071 514 264). This is for financial adviser use only – it is not to be distributed to clients. The communication has been prepared to provide financial advisers with technical resources, support and knowledge. The information in this document is current as at the date of publication and reflects our understanding of existing legislation, proposed legislation, rulings etc as at the date of issue, and may subject to change. In some cases, the information has been provided to us by third parties. Whilst care has been taken in preparing this document, no liability is accepted for any errors or omissions in this document, and loss or liability arising from any reliance on this document. Any general tax information provided in this publication is intended as a guide only and is based on our general understanding of taxation laws. It is not intended to be a substitute for specialised taxation advice or an assessment of your liabilities, obligations or claim entitlements that arise, or could arise, under taxation law, and we therefore recommend your client consult with a registered tax agent.