Super & Retirement Question

Written on the 27th of March 2009 by Jeremy Gillman-Wells - Bentham Financial Group

Q: I have a SMSF and turn 65 shortly. At aged 65 can I live off saved income and let my super accumulate for another 12 months before converting it to an allocated pension. Thanks, Dave.

A: The rules applying to Self Managed Super Funds (SMSF) are no different to those affecting all superannuation when it comes to "conditions of release". Basically, a condition of release means you can access the money in your super to do something with it such as start an allocated pension income stream or withdraw a lump sum and buy a boat etc etc...

Now in the old days, there was also a concept called "compulsory cashing of benefits". That is, there existed a requirement to compulsorily cash out your super benefits after age 65 if you could not satisfy a work test (worked 240 hours in the financial year) to keep the money in super. Furthermore, there was a requirement to cash out benefits at age 75 regardless of work status.

In the Federal Budget of 2006-2007, the government abolished the compulsory cashing rule. The effect of this is that you may keep your benefits in super (SMSF or otherwise) indefinitely, regardless of your age or work status.

Where you decide to retain your benefits in super accumulation phase and not draw a pension, the earnings on the fund assets will generally be treated as assessable income and be taxed at 15%. (The tax rate in pension phase is 0%).

So, let your super accumulate away...for another 12 months or however long suits you.

Disclaimer: This article is general in nature and is not intended as investment advice. Readers should always seek further advice before making any financial decisions.

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