SMSF members should be aware that ceasing to go into a workplace regularly may not be sufficient enough for them to meet a condition of release that will allow them to access their superannuation as ongoing entitlements can be considered as paid income, a technical manager has highlighted.
MLC TechConnect senior technical services manager Julie Steed said there were a number of conditions of release for superannuation related to retirement and some of these required the complete cessation of any form of paid work.
“The area where I find people get tripped up the most is in relation to what is a termination of employment. It’s where an arrangement under which the member was gainfully employed has come to an end. It is not where it has changed or even substantially changed; it has to have terminated,” Steed said during a webinar hosted today by The Auditors Institute.
“This is an area where SMSF trustees and members, in their own mind, think they have retired because they have stopped going to work, but in fact their employment arrangements may not have technically ended.”
She gave the example of Sharmi, who worked for the same employer for 30 years before retiring and taking all her accrued leave, but while on that leave accepted a new casual role at the same company.
“In Sharmi’s mind they have retired and are taking their leave and even though accepting a new casual role with the same company, quite likely in their mind it was a termination. For our purposes of meeting a condition of release, is this a termination?” she said.
“If we have a situation where Sharmi left work, took leave and terminated employment and then some time after the termination accepted a casual position, that would be okay, but if they had left work, took leave and accepted the casual position while on leave, that won’t qualify as meeting the condition of release.
“It can be very confusing for SMSF clients because in their mind they retired the day they stopped going to work.
“If they are on extended leave and taking annual and long service leave as actual payments, they might think they have met the condition of release even though they have stopped going to work, but they are still employed by the company and receiving salary and wages in the form of those leave payments.”
