There are two ways that you can access your superannuation at age 60 and still work. One such way involves limited access to your superannuation and the other provides full access to your superannuation.
You can, in fact, access your superannuation as soon as you reach your Preservation Age, even if you are still working.
Reaching age 60, however, does provide a little more leniency in the criteria you need to meet for full access to your superannuation benefits.
There is also favourable tax treatment of withdrawals from superannuation for people aged 60 or over, compared to individuals accessing their superannuation under age 60.
Can I Access My Super at 60 and Still Work?
There are two ways you can access your super at age 60 and still work; either by using your super to start a transition to retirement pension, or by meeting the superannuation definition of retirement. Let’s take a look at both options and which option is best for you.
Option 1: Commencing a TTR Pension
As age 60 guarantees that you have met your superannuation Preservation Age, you are able to commence a Transition to Retirement (TTR) Pension income stream with some or all of your superannuation accumulation balance while you are still working.
A TTR Pension Income Stream provides you with the ability to withdraw between 4% and 10% of the TTR pension balance each financial year, based on the value of the pension on 1 July of each year.
If you commence the TTR Pension part way through a financial year, the 4% threshold is pro-rata and the 10% threshold stands.
The formula for calculating the pro-rata amount for superannuation income streams is:
Minimum annual amount ($) x (Days in Payment Period/Days in Financial Year)
Therefore, you can use TTR Pension income to supplement your work-related income to assist in covering living expenses as you transition to retirement, or you can contribute part of your work income to super as a Concessional Contribution, so as to reduce income tax and then replace the sacrificed income with tax free pension payments from your TTR Pension income stream.
All investment earnings within a TTR Pension are taxed at up to 15% (same as accumulation phase). So, on a balance of $500,000 and an assumed income earnings rate of 4% p.a., this would mean earnings tax of $3,000 p.a.
This earnings tax is deducted from your super balance, so you might not even notice.
If eligible, Option 2 is a more tax-effective means of accessing your super.
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Option 2: Meeting a Retirement Definition
The second way to access superannuation at age 60 and still work is to meet one of the definitions of ‘retirement‘ for superannuation condition of release purposes. The one definition that is relevant in this instance is:
In the case of a person who has attained the age of 60 – an arrangement under which the member was gainfully employed has come to an end and the person attained that age on or before the ending of the employment.
This means that, if you cease an employment arrangement (any employment arrangement) on or after the age of 60, you will have full access to your total superannuation savings that have been accumulated up until the point that you ceased the employment arrangement. These superannuation savings can be taken as an account based pension income stream (subject to the Transfer Balance Cap), a lump sum withdrawal from super, or a combination of both.
All investment earnings within an account based income stream are taxed at 0%. So, on a balance of $500,000 and an assumed income earnings rate of 4% p.a., this would mean earnings tax of $0 p.a.
Although the employment arrangement had ceased, commencing a new employment arrangement and returning to work the very next day (i.e. changing jobs) would not invalidate your ability to have full access to your super. However, any subsequent contributions made to superannuation after the date that you met the condition of release by ceasing an employment arrangement after age 60, would not be accessible. You would need to meet another condition of release to access subsequent contributions.
Tax on Lump Sum Withdrawals from Super Over 60
To have access to lump sum withdrawals from super on or over age 60, you would need to have met the conditions under Option 2, above. Or, meet one of the other two definitions of retirement – permanent retirement with no intention of returning to full-time or part-time work OR attaining age 65.
Assuming you have met a superannuation condition of release – giving you access to all of your superannuation savings – the tax on the superannuation withdrawal will depend on the tax components that make up your superannuation balance. You can find out the tax components of your balance by getting in touch with your superannuation provider.
The two tax components that make up a superannuation account balance are the Tax-Free component and the Taxable component. The Taxable component can either be Taxable (taxed) or Taxable (untaxed).
All lump sum withdrawals must be made proportionately from each component.
Tax on Superannuation Pension Income Over 60
Whether you draw an income from a TTR Pension or an ordinary Account Based Pension, the income received is taxed identically. The only difference between the two income streams is that a TTR Pension limits the maximum income you can draw each year to 10% and does not allow commutations.
Again, the superannuation tax components that make up your pension income stream balance will determine the tax payable.