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Expect stumbles with new preservation age

The new preservation age for superannuation, which started last Wednesday, was bound to result in slip-ups by advisers and trustees, an industry practitioner has warned.

On 1 July, the preservation age increased from 55 to 56, which means Australians turning 55 will have to wait at least another year before accessing their super benefits under the normal retirement rules.

The preservation age will progressively increase to 60, depending on a person’s date of birth.

“I guarantee that people are going to make this mistake over the next five years because the preservation age is creeping up one year at a time,” Chartered Accountants Australia and New Zealand (CAANZ) senior tax and superannuation trainer James McPhedran told the CAANZ SMSF Day in Sydney.

“You’ve got to track your clients’ birthdates post 1 July 1960 and based upon that birth year, they’re going to have a new preservation age for next year and the four years after that.

“So you’ve got to make sure you don’t start a pension until your client has actually reached age 56 57, 58 or 59 and then eventually 60.”

For anyone born before 1 July 1960, the preservation age was 55.

Generally Australians cannot access their super until they have retired on or after reaching preservation age.

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