To meet the definition of retirement and satisfy a condition of release, an individual’s employment arrangement must change significantly.
A technical specialist has stipulated an individual’s employment situation must have changed significantly in order for them to meet the definition of retirement that will allow them to have satisfied a condition of release that will allow them access to their superannuation benefits.
To this end, Accurium senior SMSF educator Anthony Cullen noted if a self-employed individual changed their basis of remuneration, that simple change would not mean the individual has retired in the eyes of the ATO.
“In the Charlie Crackle case study scenario on the ATO website, Charlie was employed by his family trust, he retired, he was paid out all of his benefits and then he consulted back to the business, but effectively did not change the work he was doing and rather than receiving a wage, he was receiving trust distributions,” Cullen told delegates at SMSF Professionals Day 2024 co-hosted by selfmanagedsuper and Accurium last week.
“The ATO’s view on that is in this scenario there is not enough information for us to be convinced the person has retired. He is still doing the same job, he has just tried to change the characteristic of it in the way he receives his remuneration.”
He emphasised if individuals were performing the same work on the Monday after they had supposedly retired as they had done on the Friday prior to retiring, the regulator would most likely view the move as a contrived arrangement in an attempt to satisfy a condition of release.
Accurium head of education Mark Ellem suggested arrangements such as the one illustrated in the Charlie Crackle case study would actually fail the very first requirement that defines retirement.
“The retirement condition of release requires there to be a cessation of arrangement of gainful employment. In the case study we don’t necessarily see the employment situation has actually ceased,” Ellem said.
“They may have stopped receiving wages, but they’ve simply replaced those wages with an increased trust distribution so the person has not actually ceased an arrangement of gainful employment.”
Darin is the founder and publisher of Benchmark Media, an independent publishing house whose mastheads include financialobserver, selfmanagedsuper and smstrusteenews. He has been covering the financial services space for over a decade and in this time he has worked for a variety of trade publications. Darin has also written for the Money section published in The Sydney Morning Herald and The Age.
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