Australians are required to meet a condition of release under superannuation law before they are allowed to cash preserved benefits, restricted non-preserved benefits or access any of their super.
Some conditions of release restrict the form of the benefit or the amount of benefit that can be paid. These are known as ‘cashing restrictions’.
The most common conditions of release for paying benefits are that the member:
- has reached their preservation age and retires
- has reached their preservation age and begins a transition-to-retirement income stream
- ceases an employment arrangement on or after the age of 60
- is 65 years of age (even if they haven’t retired)
- has died
Retirement is a condition of release, however, depending on a person’s age, they must have stopped working, intend not to work again and have reached their preservation age. Upon the death of a member, their super will be released to their beneficiaries.
Less common conditions of release can apply in particular circumstances. Specific rules apply to the payment of these benefits. In special circumstances at least part of a member’s super benefits can be released before the member has reached preservation age. These are:
- terminating gainful employment
- permanent incapacity
- temporary incapacity
- severe financial hardship
- compassionate grounds
- terminal medical condition
Payments of benefits to members who have not met a condition of release are not treated as super benefits – instead, they are taxed as ordinary income at the member’s marginal tax rate.