Reaching preservation age in Australia is the beginning of the necessary pre-conditions for the release of super funds.
Aside from special circumstances, reaching preservation age means a transition to retirement pension can be commenced.
From after preservation age to the age of 65, if also retired, an account based pension can be commenced.
Preservation Age – 2021
The universal preservation age used to be 55, and remains so for individuals born before 1 July 1960. For those born after that date the rules were changed from 2015, with preservation ages being increased based on the individual’s year of birth, as set out in the following table:
|Date of Birth||Preservation Age||Reaches preservation age ..|
|Before 1 July 1960||55 years old||before 1 July 2015|
|1 July 1960 to 30 June 1961||56 years old||1 July 2016 to 30 June 2017|
|1 July 1961 to 30 June 1962||57 years old||1 July 2018 to 30 June 2019|
|1 July 1962 to 30 June 1963||58 years old||1 July 2020 to 30 June 2021|
|1 July 1963 to 30 June 1964||59 years old||1 July 2022 to 30 June 2023|
|1 July 1964 and later||60 years old||from and after 1 July 2024|
Note that the official age to qualify for the government age pension has also been increasing, to reach age 67 by 1 July 2023.
The government pension age is not the same as the superannuation preservation age. Details of the government pension age test are here.
- Super funds paying benefits – conditions of release
- Super and pension age calculator – work out when you can get access to super and the age pension
- Commonwealth Super – age retirement rules
Preservation age (on its own) may not be enough to enable release of funds
Reaching preservation age is one factor enabling the release of preserved funds through commencement of a pension under the age of 65.
The consequences of incorrectly implementing a release of funds could include an adverse audit finding. An audit contravention report lodged with the ATO invites scrutiny of the fund’s compliance status, and the potential application of punitive tax rates.
The rules for complying super funds contain cashing restrictions with both age and retirement status limitations. So in all cases it is essential to review the fund’s rules and check in with a professional advisor before taking action.
Transition to retirement
The SIS conditions for release regulations set out available super fund release options (cashing restrictions) for an individual who has reached preservation age.
On reaching preservation age, a transition to retirement pension can be commenced, with minimum and maximum retirement stream amounts (currently 4% to 10% of opening balance). Excess drawings can lead to classification of the pension as (an incorrect) lump sum drawing with tax applying at marginal rates and no offset.
Under rules commencing 1 July 2017, TRIS pension funds are no longer tax free, and until age 60, the pension is included in taxable income at marginal rates with a 15% tax offset. From the age of 60 the pension becomes tax free.
Account based pension
To start the payment of an account-based pension with no cashing restrictions and full tax free concessions requires the individual to have reached preservation age AND retired, or to have simply reached the age of 65.
Minimum pension drawing amounts are specified. The minimums have been reduced for the 2020, 2021 and 2022 financial years as part of the government’s Covid-19 measures. You can check the current minimum pension draw-down percentages here.
Preserved and restricted funds
Whether funds can be used to meet super drawing requirements will also depend on their preserved or restricted status.
Preserved benefits are all member contributions and all earnings since 30 June 1999, which cannot be cashed unless fund conditions of release (including preservation age) are met. They will include both concessionary and non-concessionary contributions and the associated fund earnings.
Restricted non-preserved benefits relate to periods before 1 July 1999 and certain voluntary or employment related arrangements. These benefits require that the member meets a specific condition of release.
Unrestricted non-preserved benefits can be accessed at any time, without pre-condition. This includes funds which have previously met a condition of release or employer termination payments received before 1 July 2004
See more here: Preservation of super
For the tax position of super income streams at the various stages see here.
Early Release In Special Circumstances
In limited circumstances, there are avenues for early release of superannuation which override the requirement to have reached Preservation Age and the other conditions.
Special circumstances may include terminal medical conditions, death, severe financial hardship and compassionate grounds.
Methods and types of early release and how to apply are described by the Tax Office here and by the Department of Human Services here.
As a temporary measure under arrangements which have now ended, limited early release of funds was available to individuals affected by the impact of Covid-19.
Such funds can be re-contributed in the future (up to the year 2030) without being counted under the contribution caps.
See further: Covid-19 early withdrawal arrangements.
This page was last modified 2021-10-19