Have you considered including retirement financial planning in meeting the work test or retirement definitions?
How does the work test apply?
Under 65, you can contribute to your super fund without satisfying a work test.
If you are 65 or over, then your super fund will not be able to accept your contributions (either concessional or non-concessional) until a work test is met.
The work test is satisfied when you are:
- employed or self-employed in a business, trade or profession; and
- you receive salary/wages, directors fees, bonuses/commissions or business income in return for physical exertion; and
- your employment is for at least 40 hours within no more than 30 consecutive days (in the year, the contribution is to be made before the contribution is made).
Examples where the work test is not met:
- Volunteering for a charity (church, local hospital etc).
- Baby-sitting grandchildren.
- You personally own residential/commercial properties and look after their maintenance and collection of rent – this is because you are not in the property management and rental business.
Examples where the work test is met:
- Your family trust owns residential/commercial properties, and you are employed by the trust and receive a salary to look after their maintenance and collection of rent.
- The work test can be met with work performed overseas, not just in Australia.
Incorporating retirement financial planning into your overall strategy can help you meet these requirements and secure your financial future.
It’s time to retire – but can I take money out of super?
The definition of ‘retirement’ is determined by your age. This will affect whether you can withdraw money from your super fund. Below are the definitions you must satisfy to access your superannuation funds.
Aged 55 and less than age 60
- You’ve met your preservation age*.
- You have ceased gainful employment (i.e. stopped meeting the above work test).
- You have no intention of returning to work for 10 hours or more each week.
Aged 60 and less than age 65
- You’ve met your preservation age*.
- You have ceased gainful employment (i.e. stopped meeting the above work test).
Aged 65 and over
- You are deemed retired irrespective of your working status (you can, however, continue to contribute to your superfund if you pass the work test as above).
* Preservation Age: ranges between age 55 to 60 and depends on when you were born before 30 June 1960 and after 1 July 1964.
What documentation is required to substantiate my ‘retirement’?
- Genuine termination of employment statement.
- Statutory declaration to confirm intention not to work again for more than 10 hours per week.
Can I retire and then return to work?
Yes. However, any subsequent contributions after the retirement date cannot be accessed until a new retirement definition is met. For example, you retire from your full-time work as an architect and then from your directorship of the family trust, where you manage the investment portfolio and received a wage.
As always, if you want to discuss the ability to contribute to or access your super fund balance, please contact us to discuss.
Kreston Stanley Williamson Team
*Correct as of March 2016
*Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
