Q & A – Superannuation Spotlight

Posted on 11th April 2016 by Christabelle Harris

Q : What Age Can You Access Your Superannuation Benefits?

A: Generally, your superannuation cannot be accessed until you reach your preservation age. This is the minimum age that you must reach before you are able to access your preserved superannuation benefits.

Legislation allows for the early release of preserved super benefits before preservation age in very restricted circumstances:

• Severe financial hardship;
• Compassionate grounds, for example pay for medical treatment for your or a dependant, modify your home or vehicle for the special needs of you or a dependant because of a severe disability, pay for expenses associated with a death;
• Temporary or permanent incapacity.

If you have ‘Unrestricted non-preserved benefits’ included within your superannuation entitlement, you can access this component at any time if your fund’s rules allow it.

Once you reach your preservation age, depending on your circumstances you can access your preserved superannuation benefit as follows:

1. If you retire (meet a condition of release), you can access your entire super as either a lump sum or an income stream (pension).
2. If you don’t retire, you can access your super as a transition to retirement income stream (TTR), but not as a lump sum. There are also restrictions around the maximum amount you can withdraw.
3. When you turn 65, you can access your entire super as either a lump sum or an income stream whether you are retired or not.

From 1 July 2015, the preservation age increases based on your date of birth.

Prior to 1 July 2015 preservation age was 55-years-old. Therefore, if you were born before 1 July 1960 you could access your superannuation benefits from age 55. However over the next ten years the preservation age is legislated to increase from 55-years-old to 60-years-old.

The increase in preservation age is not new legislation, however since preservation age has been fixed at age 55 for a number of years this increase may catch some people by surprise. It is important that you are aware of the age at which your superannuation can be accessed – accidentally accessing your superannuation entitlements before you are eligible could result in significant penalties.

The table below details preservation age based on your date of birth:

We recommend that you review your retirement plans as the increased preservation age means that you may have fewer years to employ a transition to retirement strategy which can provide you and your super fund with tax free benefits.

Under current legislation, please be aware that depending on your superannuation entitlement components, drawings from your super fund prior to reaching age 60 will be included as taxable income for you personally and will be taxed at your marginal tax rate.  Generally a 15% rebate will apply.

Those born after 30 June 1964 must now wait until 60-years-old to be eligible to access their superannuation. If you turn 55-years-old this financial year you cannot start a transition to retirement pension or access your superannuation until the 2017 financial year.

Please contact our Superannuation Manager Helen Cooper on 08 9316 7000 should you wish to discuss your specific circumstances in more detail.

Q: What happens to your superannuation when you die?

A: It is a common misconception that a person’s Will covers their superannuation benefit. A deceased person’s Will has no legal standing to deal with their superannuation benefit unless the member has a valid binding death benefit nomination directing their superannuation be paid to their Estate via the Legal Personal Representative of their Will.

Superannuation paid after a person’s death is called a super death benefit. When a person dies, their remaining superannuation balance, together with any life insurance benefit held within the superannuation fund, will be paid in accordance with their wishes if a valid binding nomination is in place.

Superannuation death benefit can only be made to ‘eligible persons’. Eligible persons includes your spouse, children (including adopted, step-children or ex-nuptial), any person you were in an interdependent relationship with or who was financially dependant on you at the time of your death and the legal personal representative of your estate.

If you wish to leave your superannuation death benefit to an individual who is not an ‘eligible person’, you can nominate the benefit be paid to your estate via your legal personal representative. The benefit can then be paid from your estate to the desired person.

In order to nominate a beneficiary the member needs to complete a beneficiary nomination form.

There are both lapsing and non lapsing binding nominations and non-binding nominations. In order to know what beneficiary nomination form is available to your superannuation entitlement/s, you should contact your fund provider/s and if you are a member of a self-managed superannuation fund you need to refer to the current Trust Deed.

Types of death nomination forms:

Lapsing: As the name suggest lapsing nominations expire after a certain amount of time.

• They are usually valid for a period of up to three years after the nomination was made
• For the nomination to remain current you must confirm the nomination in writing before the end of every three year period.

Non-Lapsing: A non-lapsing nomination does not expire.

Binding:

• If you have a valid binding death nomination in place, the Trustee or the legal personal representative must pay your superannuation benefit in accordance with the binding nomination.
• A typical binding death nomination will set out what proportion of the superannuation benefit is to be paid to each beneficiary.
• Having a binding death nomination in place provides certainty as to how your death benefit will be paid.

Non-Binding:

•  If you have a non-binding nomination is place, the Trustee can use the nomination as directions as to how the Death Benefit may be distributed.
• Ultimately, the Trustee retains controls and may use their discretion as to how to pay your superannuation death benefit.

Please be aware that there are different tax considerations depending on your superannuation components and who your beneficiaries are. If you require any further information please do not hesitate to contact our Superannuation Manager Helen Cooper on 08 9316 7000.