The termination of a gainful employment opportunity can only fit the definition of retirement with regard to satisfying a condition of release if that particular work situation involved a gain or reward, a senior superannuation executive has said.
To this end, Institute of Financial Professionals Australia (IFPA) head of superannuation and financial services Natasha Panagis noted individuals will not be able to determine what constitutes a gain or reward within the retirement savings framework.
“[The concept of] gain or reward isn’t defined in the super legislation and so it takes its ordinary meaning and if you look at the Macquarie Dictionary, it defines gain as to get an increase or addition or profit and reward is defined as something given or received in return for service, merit or hardship,” Panagis acknowledged.
She pointed out there is a further criterion to be satisfied with regard to superannuation.
“So in the context of satisfying the gainful employment definition, there must be a direct link or a nexus between the activity undertaken and the reward provided for that activity,” she told attendees of an IFPA member webinar held last week.
According to Panagis, though, a particular level or amount of remuneration involved is of no consequence.
“The amount of gain or reward doesn’t necessarily have to be commensurate with the level of effort or activity undertaken. The reward as well doesn’t necessarily need to be received as cash and could be received as services or fringe benefits or other valuable consideration,” she noted.
In addition, she confirmed gainful employment can have occurred many years ago and can also relate to a job completed overseas.
She emphasised the need for SMSF trustees to ensure they have one critical element, if looking to establish the termination of a gainful employment situation, that will allow them to meet a superannuation condition of release.
“It’s important, particularly for SMSF trustees, to retain some written evidence of the member’s cessation of gainful employment. [They should] keep that on file and also send a copy to the [fund] administrator and to the fund’s auditor so they have access to that information,” she advised.
