Starting a new job after legally retiring will not cause a person to lose the tax benefits from an existing income stream.
An individual who meets the legal definition of retirement and satisfies a condition of release can continue to receive full benefits from an existing pension even if they resume full-time employment, as confirmed by an SMSF technical specialist.
Specifically, Anthony Cullen, a senior SMSF educator at Accurium, stated that this applies if a superannuation fund member is under 60, has met a condition of release by ceasing gainful employment and declaring no intent to be gainfully employed again in the future, and commenced a pension at that time but subsequently took on another job. Importantly, Cullen emphasized that the member will retain the tax-free status of that pension.
“It comes back to the concept of intent at the time. I’ve had members who ceased work, declared retirement, started a pension, and then later received a job offer but thought they couldn’t accept it because they had retired and started a pension. I explain that the situation was dealt with at that specific point in time,” he told delegates at the SMSF Professionals Day 2024, co-hosted by selfmanagedsuper and Accurium.
“What happens now does not affect them. They don’t need to worry that their benefits are preserved again just because they’ve gone back to work. These are two separate matters and do not connect.”
Mark Ellem, head of SMSF education at Accurium, cautioned that benefits from the income stream can continue as long as the condition of release is legitimate. “The focus will be on whether the condition of release that converted your money from preserved to unrestricted non-preserved was genuine or contrived,” Ellem noted. He added that if the situation is legitimate and supported by the necessary documentation, the individual can take on a new job and receive two forms of income – one tax-free from the pension and the other taxable from the employer.
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Sundaram Shanmugam
Smart SMSF Team
