Can I quit and find another job but still access my super?

You say leaving a job is a suitable condition of release once preservation age is reached. My preference when I turn 60 would be to resign and leave my profession. At that time, rather than starting a transition to a retirement income stream (TTR), I would take most of my super as a lump sum, leaving a small sum to cover TPD (total and permanent disability) insurance payments, then seek work in another field. I can’t find an ATO reference to leaving a job – only reaching age 60 and retiring or starting a TTR. Is leaving a job voluntarily definitely grounds for super access?

To access your super upon reaching age 60, you need to satisfy a condition of release which involves retiring from a job – it need not be your main job. You have satisfied this condition. A TTR is a commonly used strategy for people who wish to keep working but access part of their super as an income stream.

You can keep working and crack into your super with a transition to retirement income stream.Credit: Simon Letch

I have been declared totally and permanently disabled, and my TPD benefit has been paid into my superannuation account. I’m told I can roll this amount into a new super account to increase the tax-free portion and then transfer it into a pension account. I am only 40. Additionally, I receive an income replacement policy that pays 75 per cent of my previous income plus superannuation contributions. Would this strategy help me meet my financial needs? Would it be possible to implement this, and what are the tax implications?

Mindy Ding of the Entireti tells me insurance proceeds paid into a super fund form part of the taxable component within the account. Ordinarily, when a pension is commenced with those super monies, the tax componentry is carried across.

However, where two medical practitioners have deemed you permanently disabled, the law allows the tax components to be re-adjusted when a pension account is commenced with a new provider.

Your current super fund can increase the tax-free component by an amount calculated under a formula, thereby reducing the taxable component.

While you are under age 60, the (now reduced) taxable component of the pension payments you receive will be taxed at your marginal tax rate with a 15 per cent tax offset. The income replacement insurance proceeds are taxed at your marginal tax rate.

We are 73 and 71 and have a self-managed superannuation fund (SMSF). Our pension accounts have reached their contribution limits, so we also have accumulation accounts totalling $130,000. We intend to withdraw $400,000 from our super to help fund the purchase of an apartment, which we intend to move into. Once we sell our current home, we would like to contribute $300,000 each to our SMSF under the downsizer contribution provisions. Can we rebuild our pension accounts back to the limit, or will the downsizer contributions remain in our accumulation accounts, where earnings are taxed at 15 per cent?

This is all possible – just make sure the withdrawal comes from the pension component as a lump sum payment.

The downsizing contribution may be made by anyone over 55, irrespective of their superannuation balance. Once you have made that contribution you can simply move $400,000 of it into pension mode.

You often recommend insurance bonds as a smart way to save for grandchildren. I appreciate their many benefits – particularly their security in protecting funds from potential disputes such as will contests. However, as self-funded retirees who don’t pay any tax in a given year, we wonder if insurance bonds remain the most effective way to set aside money for our two grandchildren, aged three and six. We’re thinking of starting with $20,000 each (perhaps slightly more for the older one) and contributing $200 monthly. We don’t anticipate any issues with their inheritance and it’s unlikely we would ever need the age pension.

Insurance bonds can be an excellent tool for avoiding the punitive children’s tax, which applies when money is held directly by the child or by a trustee on their behalf. However, your circumstances are unique. You’re not aiming for the age pension and are paying zero tax. This opens up more flexible and efficient strategies for managing these funds.

The ideal approach would be to hold the investments in your own name. Since you have two grandchildren, you can earmark specific investments such as low-cost index funds for each of them within your portfolio.

The dividends from these funds are mostly franked, so the income will be tax-free in your hands. When the time comes to sell the investments, capital gains tax (CGT) will apply, but it should be manageable.

This is because a significant portion of the growth will come from reinvested dividends, which will increase the cost base and reduce the taxable gain. After the discount, I estimate the CGT at 15 per cent.

Noel Whittaker is the author of Retirement Made Simple and other books on personal finance. Questions to: [e-mail]

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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