Retirement is rarely one-size-fits-all. For many Australians, it can include a bit of paid work in the form of consulting, casual employment or even a full return.
Wondering what this means for your super, pension, or taxes? You’re not alone. Our financial advisors get asked these questions all the time. We answer them below so you can enjoy retirement on your terms.
If you start working once you've started accessing your super, can you continue to access it?
Absolutely, you can. Entering the superannuation pension phase means you're intending to permanently tap out of the workforce, but life can throw a curveball or two.
If you find yourself working again, you are still eligible to receive the superannuation income stream you may have started upon your initial retirement.
Just note that any new employment will likely involve your employer making super guarantee payments on your behalf. These will likely go into a new accumulation account (not your pension income stream) which you can later convert into another pension upon your eventual retirement.
How taking on a job affects your age pension
This one's a bit more complex due to the Age Pension being means tested, meaning your payments are determined by a calculation of your assets and income.
An increase in employment income will likely prompt Centrelink to reassess your situation for age pension entitlements.
There is a common misconception that access to your superannuation pension and the age pension is on the same timeframe, in more recent years there has been a shift in these eligibility ages.
Access to the age pension (Centrelink funded) becomes available at 67, while you can draw a super pension from 60 if you’re retired, or at 65 if still working.
Tax implications - especially if you've been drawing tax-free from your super
Here's some good news if you return to work: your super pension isn't considered taxable income, allowing it to sail through your tax return untouched.
However, if you dive back into the workforce, note that your employment income will be taxed at your marginal rate. The key takeaway here? Your tax-free super pension remains just that. Tax-free.
The ‘Work Test’ and making super contributions when over age 67
In order to make tax effective contributions into your super when you are aged between 67-74 you will need to show that you have been gainfully employed for 40 hours or more within a 30 day period throughout a financial year.
Upon meeting this test, you will then be able to claim a tax deduction against additional personal super contributions. This provides people who have re-entered the workforce later in life the ability to continue to make tax effectively contributes to boost their superannuation balance.
Other things to keep in mind about working in retirement
Maybe you're selling your family home, a business, you have a disparity in super balances between partners or are looking to sell personal assets to fund your retirement. These can all impact your super strategy. From the age 55 to 75, there are plenty of ways to make the tax advantages of the super system work for you.
Each retirement journey is unique, an assessment of your personal situation and circumstances from a financial adviser could maximise your retirement plans.
We Help You Retire Your Way
BlueRock’s financial advisors take a holistic approach to growing and protecting your wealth. That means we create a plan just for you, factoring in your life goals and financial situation to help you live the lifestyle you desire in retirement. Submit the form below to speak with a financial advisor.
Disclaimer: The content is intended as general information only and should not be considered as advice on any matter and should not be relied upon as such. This has been prepared without taking into account any individual objectives, financial situation or needs. You should therefore consider the appropriateness of the information in regard to these factors before acting or seek advice before making any financial decisions. Blue Rock Investments (Melb) Pty Ltd is the holder of an Australian Financial Services Licence (AFSL No: 335588).
