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Return to employment after claiming superannuation

Discussion in 'Superannuation, SMSF & Personal Insurance' started by palmtree, 22nd Dec, 2010.

  1. palmtree

    palmtree Member

    4th Aug, 2010
    In few months I will reach the preservation age (55 years old), I am intending to arrange with my employer have a clean break say resign from work and apply for claiming my lump sum supper and pay 15% tax on my lump sum benefit.

    Pay the money on my home loan to retired my debt. Go back to employment as soon as possible, say 2 weeks later.

    Is this possible? any legal implication?

    Last edited by a moderator: 22nd Dec, 2010
  2. Superman

    Superman Well-Known Member

    6th Nov, 2007
    Gold Coast, QLD
    Hi Palmtree,

    To access your ENTIRE superannuation benefits after hitting age 55, you have to permanently retire with no intention of returning to any type of income earning activity.

    If you are with an industry or retail super fund, you simply need to tick the appropriate box and sign the declaration on the withdrawal form.

    You have what is called the low-rate threshold (which is about $150k) which attracts a 15% tax rebate on the taxable component of your lump sum - meaning the first $150k of your taxable component is effectively tax free. The tax free component is obvious tax free - even if you are under age 60 - which means the tax may be reduced significantly. You latest super account statement should give you the breakdown of what is taxable and what is tax free.

    It is not uncommon for people to retire, get bored in a couple of months, then return to employment. It doesn't change the fact that their intention was to retire permanently at that time.

    An alternate strategy you could utilise is a transition to retirement pension to draw down 10% per annum of your account balance for the next 5 years until you turn 60, then take the lump sum which will be 100% tax free.

    This strategy when combined with extra super contributions via salary sacrifice can also save you significant tax year to year until you hit age 60 as any amounts drawn from super as a pension also attract a 15% tax offset.

    If the monies invested in your super can earn you more per annum than the interest you are paying on your mortgage, you will be better off accumulating more in super until you hit age 60.

    I hope this makes sense.
  3. Hillview

    Hillview Member

    1st Nov, 2010
    Perth, WA

    Also watch out because you are essentially taxing yourself 15% on part of your super that if the rules don't change and you retire at 60, would come out tax free, which could be a significant amount of money. You are also "cashing out" at a time where the stock market is ok but still well under where it was.