The Australian Prudential Regulation Authority (‘APRA’) has just updated its Superannuation Prudential Practice Guide SPG 280 — Payment Standards (‘SPG’) in June 2017. Of interest in the SPG are APRA’s comments on the retirement definition in the Superannuation Industry (Supervision) Regulations 1994 (Cth) (‘SISR’), in particular it is useful to see APRA’s confirmation that a member who reaches 60 and has two or more employment arrangements will meet the definition of retirement if they cease one of these employment arrangements. While APRA is not the regulator for SMSFs, its comments and interpretation of legislation are influential, including for the ATO.
With the introduction of the term ‘retirement phase’ pensions post 1 July 2017, it is now more important than ever to consider whether a member can start an account-based pension (‘ABP’) or convert their existing transition to retirement income stream (‘TRIS’) into an ABP. Only retirement phase pensions, such as ABPs, will be able to claim the pension exemption post 1 July 2017 on investment returns on assets used to support the pension. On the other hand, transition to retirement income streams (‘TRIS’) are not initially classed as retirement phase pensions and therefore cannot claim the pension exemption until they enter retirement phase, once an appropriate condition of release is met and the trustee is notified (except for attaining age 65, where no notification is needed).
The definition of retirement
Retirement is a condition of release with a nil cashing restriction and satisfying this definition will allow members to commence an ABP.