Superannuation rules for over 55s is important because it signifies the first superannuation preservation age.
Many superannuation rules become relevant for people over age 55, as this is the earliest age that you became eligible to access your super.
If you’re over age 55, there is a lot of planning that you need to consider in regards to your superannuation – regardless of whether you are still working or not.
It is important to note though, the age of 55 is only the preservation age for those born prior to 1 July 1960. It then progressively increases each year up until 30 June 1964, at which stage an individual’s preservation age is 60.
Use this calculator to find your preservation age.
Superannuation Rules for Over 55s
Age 55 is the lowest preservation age for superannuation. This is the earliest age that someone can access their superannuation without being disabled or dying or in desperate need of funds.
There are even specific rules that allow people to have limited access to superannuation using the transition to retirement provisions.
The Preservation age increases from 55 for those born after 1 July 1960, as follows:
| Date of Birth | Preservation Age |
|---|---|
| Before 1 July 1960 | 55 |
| 1 July 1960 – 30 June 1961 | 56 |
| 1 July 1961 – 30 June 1962 | 57 |
| 1 July 1962 – 30 June 1963 | 58 |
| 1 July 1963 – 30 June 1964 | 59 |
| After 30 June 1964 | 60 |
Over 55 and Still Working?
If you are over your Preservation Age and still working, you are able to commence a Non-Commutable Account Based Pension. A Non-Commutable Account Based Pension goes by may other names too, such as a Transition to Retirement (TTR) Pension or Transition to Retirement Income Stream (TRIS)
A TTR Pension allows you to commence an income stream using some or all of your superannuation accumulation account savings. This allows you to draw an income between 4 – 10% of your pension balance each year, calculated at 1 July of each year or at the date of commencement of the pension.
This is the only way that you are able to access your savings if you have reached your superannuation preservation age, but not yet met a full condition of release, such as permanent retirement or reaching age 65.
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Over 55 and Permanently Retired?
In order to have full access to your super once reaching your superannuation Preservation Age (minimum age 55), the following condition must be met:
You need to permanently retire with no intention of returning to full-time or part-time work.
If you meet this condition, you have full, unrestricted access to your super. However, accessing your superannuation prior to age 60 is likely to incur tax.
In this instance, the most important thing that you need to find out is the tax components associated with your super balance.
Your super balance can consist of three different tax components:
– Taxable Component
– Taxable (Untaxed) Component
– Tax-free Component (AKA Exempt Component)
Tax on Super Withdrawals Age 55-60
The tax that you pay on any superannuation withdrawals between age 55-60 is dependent on the components that make up your balance and the way in which you make the withdrawal (lump sum or income stream).
If some of the withdrawal is made up of the tax-free component, this portion will always be able to be accessed tax free. All withdrawals must be made proportionately from each tax component.
I have summarised the tax for the 2018/19 financial year below:
Lump Sums
| Threshold | Tax-Free Component | Taxable Component | Taxable (untaxed) Component |
|---|---|---|---|
| First $205 000 | 0% | 0% | 15% |
| $205 000 – $1 480 000 | 0% | 15% | 30% |
| Over $1 480 000 | 0% | 15% | 45% |
Income Streams
| Tax-Free Component | Taxable Component | Taxable (untaxed) Component |
|---|---|---|
| 0% | MTR less 15% rebate | MTR (no tax offset) |
If you would like anything clarified or have any further questions about Superannuation Rules for over 55s or any other topics, please do not hesitate to leave a comment in the section below.
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