Ceasing Employment Arrangement to Access Income Stream

Discussion in 'Superannuation, SMSF & Personal Insurance' started by John Smith, 1st Dec, 2020.

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  1. John Smith

    John Smith Well-Known Member

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    I am 62 and my resignation date from my current position is December 17 2020. At this point in time I have no intention to going back to work therefore I can clearly state that I have will have ceased my employment arrangement on this date.
    However, I will be receiving a payout for outstanding long service leave, and as I am a teacher, I will be paid for ongoing school holidays until Jan 27.
    Am I able to begin an income stream from my super from Dec 17 or must it be Jan 27? I have not been able to find a definitive answer to this query from any of my online research. Can anyone help me with this?
     
  2. Trainee

    Trainee Well-Known Member

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    If you are long service leave paid out and for the school holidays anyway, does it matter?
     
  3. Mark F

    Mark F Well-Known Member

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    My thoughts would be from 17 December as any payments received after this time are payments for accrued leave (personal and LS) and not ongoing employment as you resigned as of 17 December and any notice period will have been worked out by that date..
     
  4. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    You are referring to a condition of release for super

    I would be wary of commencing a pension as it could well be considered a TRIP and these are complex for commutation. However another COR is to "cease a employment arrangment" and this has far less onerous issues as you are aged at least 60. What does that mean ? It means you are no longer employed. Being paid to end of school term is quite nomral and on that date you employment ceases. This issue comes up frequently with super and the generaly accepted view is the general use of the terms "employment arrangement". You are still gainfully employed in a employment arrangement until the final payment for entitlements and any pay is made. But a dispute which requires to to claim further benefits may be excluded. Depending on payroll you may find this final pay is paid to you earlier of later than 27 January. Getting that dates right is important as otherwise the super would fail the tests for super pension benefits and be normal taxable income.

    There is a further group in a worse position. Someone with accumulated benefits who wasnt working after age 60. They cant "retire" and must wait until age 65.
     
  5. John Smith

    John Smith Well-Known Member

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    Contacted super company and they said December 17 sounds right. It is the onus of the member to justify the date but they were not “too concerned” about it.
     
  6. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Of course the fund wont be concerned. They arent the taxpayer. And arent qualified to actually determine the issue.
    SIS Reg 1.06 defines a super pension. Tax law defines a complying super pension as exempt . Tax law exempts a complying pension. So if its non-complying............

    TR 2013/5 is often ignored at peril. It confirms that a non-complying pension isnt a pension and may end as soon as it commences.
    I would be assuming a 27 January date until I had a ATO opinion that the earlier date is acceptable.
     
  7. John Smith

    John Smith Well-Known Member

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  8. John Smith

    John Smith Well-Known Member

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    Contacted ATO and they said December 17 is okay.
     
  9. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    Excellent. It is a grey area. Its the sort of matter I would note down the call reference number for future reference if it ever emerged as a issue.

    One matter that can affect this is what can be released !! Remember if you start a pension and still get paid and earn further super aftre that date then that might remain preserved until a futher COR later occurs. To start a pension at December you likely need to have the financials and member balances updated to the day prior then commence the new pension based on the member balance at that time (and prior to later contribnutions regardless of when they are received. This may maximise the amount you can access too.
     
  10. Pier1

    Pier1 Well-Known Member

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    @John Smith , Out of curiosity may I ask what the urgency would be, 17 Dec to 27 Jan sound like an insurmountable period.
    i.e. what is the benefit of commencing at the earlier date?
     
  11. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

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    eg a new job is obtained and the person is aged under 65. Note that contributions arising from the new job will then be preserved until a new COR occurs or age 65 is met.
     
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  12. John Smith

    John Smith Well-Known Member

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    As current drawdown is 2%, it allows me more time to get extra into income stream balance eg my super is invested in a fund that pays distributions quarterly. The urgency allows me to get the distribution for Jan, April and June. With a balance of 1.6m, that means guesstimating my return will be 5% - 1% drawdown = 4%. I will be better off by approx 20k.
     
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