Documentation, Retirement

Benefits based on current status

superannuation benefits

Only members’ current circumstances can be used to determine whether their super benefits are subject to the preservation rules.

Superannuation balances can only be classified as unrestricted non-preserved benefits at the time a member under age 65 satisfies a condition of release via the definition of retirement and not beyond should the individual in question return to a situation of gainful employment, an SMSF technical specialist has said.

Accurium head of education Mark Ellem illustrated his point using an example where an SMSF member is aged 61 and meets a condition of release with a nil cashing restriction by ceasing gainful employment. At the time her retirement savings balance was $685,492, which was entirely in accumulation phase.

However, the member in the example makes a $250,000 non-concessional contribution a year after meeting the condition of release and earnings on the account balance of $51,412 were recorded.

Ellem pointed out that if the member was able to make the additional contribution due to recommencing a situation of gainful employment, then only the balance of $685,492 would be treated as unrestricted non-preserved benefits.

“[In this scenario] the [subsequent] contributions, the $250,000, and the [ensuing] earnings, including the earnings on the $685,492, will be subject to the preservation rules,” he explained to attendees of the most recent Accurium TechHub webinar.

According to Ellem, in this instance the most important fact a year after the member met the initial retirement condition of release is whether they still meet this condition of release under their current circumstances.

He took the opportunity to acknowledge the order of cashing that applies to the three categories of member benefits.

“It generally only applies where the benefits are cashed out of the superannuation system and where the condition of release has a cashing restriction,” he said.

“So if a condition of release does have a cashing restriction, and the amount of the benefit includes all of the three components, then our order of cashing is unrestricted non-preserved first, the restricted non-preserved if there is any, I said that would be rare, and then lastly the preserved component.”

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