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.
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 later preservation ages based on the individual’s year of birth.
|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 completely separate from 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
It is important to bear in mind that reaching preservation age is one factor enabling the release of preserved funds through commencement of a pension under the age of 65.
The rules for complying super funds contain cashing restrictions with age and retirement status limitations.
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.
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. In that case the minimum pension drawing percentages range between 4% and 14% of fund opening balance, on an age-based scale.
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, and cannot be cashed unless fund conditions of release (including preservation age) are met. They will include both concessionary and non-concessionary contributions and resultant 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. They could include 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.
This page was last modified on 21 Sept 2017