If you’ve retired but now need to go back to work, what does this mean for your super?
If you’re approaching retirement, chances are you’ve already got a financial plan mapped out to help you smoothly transition from full-time work to a life of leisure. Unfortunately, even the best-laid plans can collapse when circumstances change. For example, many retired Australians were forced to return to work after the Global Financial Crisis of 2008 wrought havoc on their retirement savings.
So if you’ve retired but a change in your financial situation means you need to return to work, what are the consequences for your superannuation? Read on to find out.
Firstly, when can I retire?
You’re free to retire from the workforce at any age, but if you want to access your super benefits you must also have reached your preservation age. The preservation age for Australians born before 1 July 1960 is 55 years old, while anyone born on or after this date has a preservation age of between 56 and 60. You can check your preservation age from the table below.
|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|
|From 1 July 1964||60|
Will I be forced to stop working when I reach my preservation age?
No, you will not be forced to stop working on your 60th birthday! You're entitled to keep working as long as you'd like, and once you turn 65 you're entitled to access your super benefits while still working. The preservation age is for those who wish to stop working, and access their superannuation.
Can I return to work if I’ve already accessed my super benefits?
The good news is that, yes, you will usually be allowed to return to work after retiring and accessing your super benefits. Even if you’ve taken a lump sum super payout or are receiving ongoing payments from your super fund, you still have the right to rejoin the workforce. However, you will need to prove that your personal circumstances have changed, and that you are required to return to work.
At the time you retired and first accessed your super benefits, your intention to retire must have been genuine. This is why you’ll find that most super funds require you to sign a declaration when you retire, stating that you never again intend to be gainfully employed for more than 10 hours a week.
So, if your retirement savings take a hit or you decide you miss the independence and social connectedness of working, you’ll need to prove to the Australian Taxation Office (ATO) or the Australian Prudential Regulation Authority that your intention to retire was genuine and that you didn’t plan to return to work all along.
If I return to work after retirement, how much can I earn?
There's no limit to how much you can earn if you return to work after retirement. You're entitled to work less than 10 hours a week and still be considered officially 'retired', with full access to your super. Anything between 10 hours and 30 hours a week is considered part-time. It's important to note that if you decide to simply reduce your hours at your current job prior to retiring down to less than 10 hours, it's still not considered retiring.
However, once you return to work and earn more than $450 a month, your employer will be required to make superannuation contributions at the current rate of 9.5% (as of 2017). And, if you're over the age of 65 you will need to complete a work test requirement before going back to work part-time or full-time. Once you reach age 75 you can still work however no super contributions can be made.
What happens to my account-based pension?
If, when you retired, you had the genuine intention of retiring permanently, your super fund would have been released, allowing you to begin a super pension. If your circumstances change and you return to work, this account-based pension can continue to be paid.
This is because the pension contains unrestricted, non-preserved super benefits, which can be accessed at any time as long as you satisfy the rules of the super fund and the pension itself. Ask your super fund, financial adviser or the ATO for information on your specific circumstances and how returning to work could affect your account-based pension.
It’s also important to be aware of upcoming superannuation changes, set to take effect on 30 June 2017, which will impose a $1.6 million balance cap on pension income streams. If your pension balance remains under this cap, your pension remains tax free. But if you exceed the cap, penalty tax applies to the amount over the limit.
What if I return to part-time work?
Part-time work offers many potential benefits to retirees, from increased social contact to some extra retirement income. But remember, “part-time” is defined as being between 10 and 30 hours of work a week, so if you wish to access super benefits when you retire, you can’t have any intention to return to part-time work.
On the other hand, if you return to work for less than 10 hours a week, you will still be considered retired and this will not have any impact on your super.
Whether you need a little extra money or you’ve simply grown bored of retirement, it is possible to return to work even after accessing super benefits. Ask your accountant or financial adviser for details on what going back to work will mean for you and your super.
What are the benefits to returning to work after retirement?
- Creates a greater sense of purpose and direction
- Provides a stable routine
- The opportunity to try new jobs and industries which you may have always wanted to try, but never did
- Extra income to supplement your super
- Keeps your mind active
- Cures boredom
- Provides an opportunity to pass on your skills / teach a younger generation
- Working, even in small amounts, makes you appreciate your time off a lot more
- Good opportunity to socialise and meet new people
If you haven't yet reached your retirement age but you need to access your superannuation, there are situations when you can access it early. Read our guide to early release of superannuation for all the details.
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