Retirement, Superannuation

Job ending not always time critical

definition of retirement

The termination of employment is not time sensitive when looking to satisfy the definition of retirement once an individual reaches preservation age.

An SMSF technical specialist has emphasised to advisers there is no timing requirement with regard to the termination of employment when a member is looking to satisfy the definition of retirement and in turn trigger a condition of release for their superannuation benefits.

Accurium head of education Mark Ellem used an example of an individual who is aged 59 today, and as such has attained preservation age, who retired from full time employment 37 years ago, when she was aged 22, and at the time declared she would never be part of the workforce again for the rest of her life.

He pointed out in this situation the individual in question had satisfied the definition of retirement and had satisfied a condition of release.

“[Here the individual] has met a condition of release. There is no requirement for the cessation of gainful employment to have [occurred] on or after the member has reached their preservation age,” Ellem told attendees of the technical webinar he hosted today.

“The timing of the cessation of gainful employment is only relevant for when the member is relying on the attained age 60 test. [That’s the test where the member says] all I’ve got to do is cease an arrangement of gainful employment, well that has to happen after person has hit 60,” he noted.

“If they’re saying look I’ve reached my preservation age, I never intend to work again and I have previously ceased an arrangement of gainful employment, then the timing of that is irrelevant.”

According to Ellem situations where an individual ends their employment status and declares they will never work again a long time before attaining preservation will lead to other compliance challenges that will need to be addressed.

“[Individuals in this situation will] need to consider whether they can provide evidence of their gainful employment, and particularly that it ceased, 37 years ago,” he said.

The individual would have to produce a record to prove this sequence of events occurred to the SMSF trustees, the fund’s auditors, and the ATO, he advised.

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