A superannuation specialist has stipulated a change in employment conditions for an individual will not satisfy a condition of release with regard to attaining retirement status, even if they have turned 60 and reached preservation age.
Under Superannuation Industry (Supervision) Regulation 6.01(7), a member of a super fund will have satisfied the retirement condition of release once they have reached age 60 if an arrangement whereby they were gainfully employed has been ended.
To illustrate this point, Institute of Financial Professionals Australia (IFPA) head of superannuation and financial services Natasha Panagis used an example where an individual, Kay, 60, has been promoted to a more senior position by the company where she is currently working.
“Moving from one role to another without ceasing employment will not satisfy the retirement definition, even if it requires a new employment contract,” Panagis told attendees of an IFPA practitioner webinar held today.
“If the employer and employee enter into a new contract of employment, the employment relationship continues notwithstanding the termination of the prior contract of employment.
“So while the member’s employment at the company is changing, so Kay’s employment is changing, there is an agreement or understanding, at the time, that she will continue to be employed by the company.
“So in this case for Kay it is unlikely she has ceased a gainful employment arrangement, even though her employment arrangement has changed and so she won’t satisfy that retirement condition of release.”
She pointed out the same outcome would be reached if an individual aged 60 changed their employment conditions whereby they ceased being a full-time employee with an agreement to be rehired as a consultant.
“While there has been a termination of [the member’s] employment contract, there is at the time an agreement or an understanding [they] will continue to provide services to the company for gain or reward,” she noted.
“Because there has been no break in the relationship, it is unlikely that [they will] satisfy that retirement condition of release by ceasing gainful employment.”
