(C) Condition of Release
This webpage covers a very complex topic in a simplified way, which means that it only covers the main points and it does not cover every rule. So be aware that sometimes the simplified explanation on this page will not cover your particular financial situation. Please read our disclaimer before you use any information on this website.
(C) Condition of Release
You might think that if you are 60 and retire, then it follows that you can access your superannuation. While this is in fact correct, the reason for this is because retirement at age 60 is a condition of release with no cashing restrictions.
Below we explain what is meant by cashing and then break down the conditions of release into two groups-those without cashing restrictions and those with cashing restrictions.
Definition of Cashing
In superannuation language, cashing refers to your superannuation fund cashing your account balance to pay you (e.g. lump sums and pension payments). So if there are cashing restrictions, there are rules about how much you can take and when. If there are no cashing restrictions, then you can take as much as you like, whenever you like.
Conditions of Release with No Cashing Restrictions
If you meet a condition of release with no cashing restrictions, then any superannuation which is preserved or restricted non-preserved becomes unrestricted non-preserved. Because all of your superannuation is then an unrestricted non-preserved benefit, you are able to withdraw as much as you like. You could withdraw the whole lot and purchase a holiday house.
There are many conditions of release with no cashing restrictions, but the main ones are as follows:
Retirement once you reach preservation age (currently 55)
- If you are 55-59, then to meet the definition of retirement you need to quit your job and satisfy your superannuation fund (strictly speaking: the trustee of your superannuation fund) that you do not intend to work more than 10 hours a week in the future. Sometimes, to satisfy the trustee of your superannuation fund, all you need to do is tick (or cross) the box on the form that says you have retired (and do not intend to work for more than 10 hours a week). Just because you have retired, there is nothing to stop you from working in the future. It is not a crime to retire (with the intention of not working again) and then change your mind and go back to work.
- If you are 60 or more, then you simply need to quit your job to meet the definition of retirement.
- If you turn 65, that on its own is a condition of release. So once you reach 65 years of age, it does not matter if you have retired or not-you have satisfied what is technically known as a condition of release.
- This condition of release can be important for people who have never worked because the first condition of release (retirement once you reach preservation age) is targeted at people who have worked. While this may sound like semantics, the definition actually talks about you quitting your job. If you have never worked, how can you quit your job? You can still put money in superannuation if you have never worked. Well if you are 65 and have never worked it does not matter! If you are 55-64, have never worked and want to access your superannuation then give us a call on (03) 9875 4300 to discuss your situation.
Permanent Incapacity or Disablement
- If you are permanently incapacitated (e.g. disabled in an accident), then this is a condition of release. The permanent incapacity can be due to physical health, mental health, or both. There are certain requirements to meet this condition of release. Please telephone us on (03) 9875 4300 for more details.
Conditions of Release with Cashing Restrictions
How benefits are treated
If you meet a condition of release with cashing restrictions then the rules are a bit more complicated. The rules in the next two paragraphs do not come up very much in practice, so do not be overly concerned if you find them confusing.
Any superannuation which is restricted non-preserved stays restricted non-preserved unless the condition of release has a nil cashing restiction.
- For example, if you stop working for an employer who contributed to your superannuation fund then this is a condition of release with a nil cashing restriction on your restricted non-preserved benefit. So your restricted non-preserved benefit (if you have one) becomes unrestricted non-preserved at this time.
- Similarly, attaining age 65 is a condition of release with a nil cashing restriction. This nil cashing restriction applies to all of your superannuation so your restricted non-preserved benefit and your preserved benefit become unrestricted non-preserved.
Any superannuation which is preserved stays preserved unless the condition of release has a nil cashing restriction.
- For example, permanent retirement after preservation age is a condition of release with a nil cashing restriction. So any superannuation which is preserved becomes unrestricted non-preserved. Note that this nil cashing restriction also applies to any restricted non-preserved benefit, so if you have any restricted non-preserved super, it too will become unrestricted non-preserved.
Example: Transition-to-Retirement (TTR) Pension
Arguably the most common condition of release with cashing restrictions is attaining preservation age (which is currently 55). This condition of release does not have a nil cashing restriction, so any superannuation which is preserved stays preserved (and any superannuation which is restricted non-preserved also stays restricted non-preserved). However, one thing you can do is start a transition-to-retirement pension. In brief, a transition-to-retirement (TTR) pension is the same as a regular (account-based) pension except that you can only withdraw 10% of the account balance each financial year. In contrast, a regular pension account has no upper limit on how much you withdraw-you can withdraw the whole lot if you wish. So the 10% limit on a transition-to-retirement pension effectively restricts how much you can cash.
- The cashing restrictions in this case mean that you can only get your money out of super via the transition-to-retirement pension. For example, suppose that 100% of your superannuation is preserved when you turn 55. If you start a transition-to-retirement pension then all of your superannuation remains preserved. Normally you cannot access any of your superannuation if it is preserved, but the rules of a transition-to-retirement pension allow this to happen (although you cannot get more than 10% of your account balance each financial year). So what is the point? The point of this example is to emphasise that a transition-to-retirement pension gives you limited access to your superannuation, even though your super is still preserved.
As mentioned above, meeting a condition of release with cashing restrictions does not mean all of your superannuation will become unrestricted non-preserved. So if you withdraw some of your super, then the rules state that the withdrawals will happen in the following order:
- First your unrestricted non-preserved benefit (if you have any) will be reduced.
- Then your restricted non-preserved benefit (if you have any) will be reduced.
- Finally, your preserved benefit will be reduced (as all your super would be a preserved benefit at that stage, so there is no other option).
Main Conditions of Release with Cashing Restrictions
There are many conditions of release with cashing restrictions, but the main ones are as follows:
Reaching preservation age (currently 55)
- If you are 55, then you can start a transition-to-retirement (TTR) pension. In short, a transition-to-retirement pension is the same as a regular pension except that you can only withdraw 10% of the account balance each financial year. Originally, the idea behind this was to allow people to access some of their super while working part-time. Instead of forcing somebody to choose between full-time work or full retirment, a person can transition into retirement by working part-time for a while.
- Transition-to-retirement pensions are also used by people who work full-time to reduce their tax bill.
Severe Financial Hardship
- If you have been on Commonwealth income support payments (e.g. the Centrelink Newstart allowance, also known as the dole) for 26 weeks or more and are unable to pay living expenses, then you can withdraw up to $10,000. Note that there are certain requirements to meet this condition of release. Please telephone us on (03) 9875 4300 for more details.
Temporary Incapacity or Disablement
- If you are temporarily incapacitated (e.g. you cannot work until your injury heals), then this is a condition of release. The temporary incapacity can be due to physical health, mental health, or both. Note that there are certain requirements to meet this condition of release. Please telephone us on (03) 9875 4300 for more details.