Taking advantage of the Superannuation Industry (Supervision) (SIS) Act definition of retirement is one of the most powerful actions advisers can perform for their clients, an SMSF strategist has said.
“The most important tool in [an adviser’s] armoury is to make sure that once a client turns age 60 that they are retired,” I Love SMSF founder Grant Abbott said in his most recent strategy seminar.
To satisfy the SIS Act definition of being in retirement, an individual must give up one form of gainful employment.
Abbott pointed out this did not mean the person in question needed to relinquish their main job and the job did not have to provide full-time employment.
“They could give up one form of gainful employment such as distributing direct mail leaflets for three or four weeks. It doesn’t matter what you are being paid for as long as you are being paid for that job, then post age 60 you are deemed to be retired,” he said.
Further to remuneration, he said the individual seeking retirement status as per the SIS Act had to have made superannuation contributions stemming from the job they were about to give up.
He noted it was the benefits that come as a result of being deemed retired under the SIS Act that made the strategy worthwhile.
‘When you are deemed to be retired, all of your preserved benefits become unpreserved and then we can flip them into an account-based pension,” he said.
He implored advisers to act on this provision of the law as soon as possible and in particular change a client’s arrangements after they turn 65 as that is an automatic retirement classification trigger under the SIS Act.
“I actually saw a 66-year-old with a TRIS (transition-to-retirement income stream) during a recent talk, which is extremely embarrassing,” he said.