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Re: Superannuation and return to work

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Newbie

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Replies 9

Hi there

I am 57 years old and recently retired from full time work as I had reached my preservation age. I took a partial lump sum payment from my super fund  (no pension) and left the balance in my super account, but my former employer has asked me to do some casual work at 8 - 10 hours per week for 12 months in a different role. I rang my super fund and they said this should be fine but encouraged my to call the ATO. I rang the ATO and was advised that as I had not taken a pension or the full lump sum, then returning to work for 8 - 10 hours a week would be fine. Unfortunately the ATO could not put this advice in writing and i am concerned that the ATO may consider this part time work and find that I have breached my condition of retirement . Can you advise please. My intent was to retire, but as my former employer contacted me for this casual work, the money would be nice.

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Devotee

Replies 5

Hi sbragg

 

If at the time you applied for your super payment you had no intention of working 10 or more hours per week ever again, everything is fine.

 

If you're working less than 10 hours per week you're not gainfully employed so there's no problem even if you'd already decided to return to work at the time you claimed your super.

 

The amount of super you took out, or whether it was taken as a pension or lump sum is irrelevant. ie if you've met the condition of release you can claim your super. There's no sense of - if you've partially met the condition of release, you can partially claim your super.

 

As for who regulates this - if your super fund is a self-managed super fund, it'll be the ATO. If it's a large fund it'll be APRA. Given that you say you called the fund I'd say it's an APRA-regulated fund.

 

I'm an ATO employee voluntarily providing my time here

9 REPLIES 9
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Anonymous

Replies 2

Hi @sbragg

 

this is always a tricky one, so the question is when you "retired" did you sign a decleration with your super fund to that extent?

 

If you signed a decleration as part of the process of accessing part of your super, your own actions can negate that intent of retirement, especially if you go back to work (even part time) straight away and even more so when its with the same employer, and you could find yourself in a spot of bother.  

 

The better approach is to apply to the ATO for Administratively-binding-advice , which gives you the opportunity to discuss with the officer that is going to provide that written advice, and the advice is binding on the ATO so you will be covered.

 

Even if you did not sign a decleration with your super fund, then seeking writting advice from the ATO will at least give you peace of mind.

 

ATO 13 10 20

 

 

 

 

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Newbie

Replies 1

Thank you so much for your advice. I like the idea of the administerally binding advice so I will contact them. I did sign a super agreement that I would not work more than 10 hours a week and I only want to work 8- 10. Thanks

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Anonymous

Replies 0

@sbragg

 

no problems ... 

 

The application process is fairly easy and contra to most beliefs the ATO staff are generally very pleasant to deal with, which has been my experience over the many years of making requests for written advice ..

 

 

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Best answer

Devotee

Replies 5

Hi sbragg

 

If at the time you applied for your super payment you had no intention of working 10 or more hours per week ever again, everything is fine.

 

If you're working less than 10 hours per week you're not gainfully employed so there's no problem even if you'd already decided to return to work at the time you claimed your super.

 

The amount of super you took out, or whether it was taken as a pension or lump sum is irrelevant. ie if you've met the condition of release you can claim your super. There's no sense of - if you've partially met the condition of release, you can partially claim your super.

 

As for who regulates this - if your super fund is a self-managed super fund, it'll be the ATO. If it's a large fund it'll be APRA. Given that you say you called the fund I'd say it's an APRA-regulated fund.

 

I'm an ATO employee voluntarily providing my time here

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Anonymous

Replies 4

Hi @SebReiter  @NicATO

 

This is just some information on "intent" ....  which you may or may not be aware of ....  

 

" Intent " is always an interesting subject and has been tested and discussed many times over the years in a number of different ATO court cases, and thats why I try to make people aware that there is a bit more to it when it comes to considering "intent".

  

Let me give you just an example of a case that comes to mind because it discusses intent in some detail  Commissioner of Taxation v Stone (2005) 215 ALR 61   quote - 

 

" A related issue is whether the inquiry is directed to the taxpayer’s objective or subjective purpose. Judicial authority leans towards subjective intention.[54] However, ascertaining subjective intention may lead to an inquiry which considers the taxpayer’s acts rather than their actual state of mind. Issacs J stated in his dissent in Ruhumah Property Co Ltd v The Federal Commissioner of Taxation that ‘the character of a taxpayer’s profits is determined by his acts, and not by the intention or motive with which he does the acts’.[55] In determining the taxpayer’s intention the real thing that has to be decided is what were the acts that were done in connection with this business and whether they amounted to trading which would cause the profits that accrued to be profits arising from trade or business.[56]

Hart and Coleman state that the modern extrapolation as espoused in Myer Emporium produces the same result as Issacs J, ‘but instead of saying that subjective intention or motive is irrelevant, the modern view is that it may be assumed from the circumstances of what has been done’.[57] Indeed Hill J expressed this notion subsequent to Myer Emporium, that ‘generally speaking a person will be said to intend the natural and probable consequences of his acts and likewise his purpose may be inferred from them’.

 

As you would know the principles in the above can apply across different taxation platforms, including income tax, gst and super, and this is evidenced by the ATO discussing intent in different taxation rulings.

 

If you have the time and inclination you may find that an internet search on this issue will come up with interesting results, which includes by Super Fund professionals and Super Fund Industry comentators, whom openly recommend on their websites and in Industry articles that returning to work after signing a decleration should be done in a measured way.  

 

This does not apply to the person whom posted the question, as they have everything covered from what they are saying.

 

 

 

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Devotee

Replies 3

Thanks @Anonymous

 

I haven't followed the links to read the cases in detail but from the brief snippets you've posted they seem to be about the treatment of some kind of income that resulted from some kind of action, where the treatment depends on what the taxpayers intention was. And whether you can look backwards from the result to make a statement about the person's intention. But there's a clear connection between an action and the result.

 

In the case of returning to work after having retired permanently the action is to sign an employment contract or something similar. And if that action occurs after the person has claimed the super benefit there's no clear evidence of what the person intended at the time of claiming the benefit. You'd need to either find some evidence to show that the person clearly intended to return to work at the time they made the statement, or you'd need to say 'Surely it beggars belief that someone could change their mind two weeks into retirement and decide to go back to work. Surely they must have had this plan all along...'

 

I'm an ATO employee voluntarily providing my time here

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Anonymous

Replies 2

Hi @SebReiter

 

I appreciate what you are saying as you have some interesting views,

 

The actions of a person before, at the time of signing and after can all be viewed in order to determine their intent.

 

Your last statement is what the courts have discussed, and made rulings on, as its all about actions and not clear evidence as you put it and may not be about "clear results", just results  otherwise why would the courts even consider actions if they could not make rulings on a taxpayers actions.

 

In these types of super instances, by their action of returning to work within a short time period a taxpayer could put themselves in a compromising position because once their actions are contra to what they have declared then their actions can be enough to shift the balance of probabilities and that’s when the onus of proof back falls on the taxpayer to demonstrate what their intent was at the time of signing a declaration. 

 

Lets take two extreme examples,

 

1/ A taxpayer signs a declaration on 1 July then the very next day they start work again.

If we take a restricted view, then because the taxpayer signed a declaration the day before then there aren't any issues as it was their intent not to work again at the time of signing a declaration. 

  

2/ A taxpayer signs a declaration on 1 July then months later on 1 December they start work again.  If we take the reverse restricted view, then because the taxpayer commenced work months later then their actions demonstrate they never intended to retire.

  

There are issues in both the above examples, which most would be able to see.

 

In the first example the taxpayer appears to have compromised their position through their actions, as they have shown through their actions that it is more probable than not that their intention at the time of signing a declaration was not to retire, in fact you can even take your approach of “there is a clear result” which is not the standard used by the courts, and therefor the taxpayer has the onus of proving their declared intent which would be difficult if not impossible for them to do.

 

In the second example, the onus is still neutral and has not shifted either way, and it’s the Commissioner that would have difficulty proving that the taxpayer has a contra intention and therefor the status quo is maintained and the taxpayer has no case to answer.

 

As you know tax professionals are the first to tout about anything that will give a taxpayer a legitimate advantage, and when tax professionals advocate a balanced and measured approach about anything then that signals to me that even they consider there are potential issues to do otherwise.   

 

NOTE - when referring to onus of proof Im assuming that you would be aware that the standard is based on the balance of probablities as per the precedents set in long standing court cases on the onus of proof.   The balance of probablities removes the need for "clear evidence" that relates to the higher standard of "beyond a reasonable doubt".

 

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Devotee

Replies 1

Hi @Anonymous

 

It's definitely a murky area with no clear answers. I agree that things can look more and less suspicious based on the amount of time that's elapsed since claiming the super, whether it's a return to the same job doing the same work, the number of hours being worked, how the job opportunity came about, etc.

 

The advantage to a taxpayer isn't huge. Once someone's 60 they only need to leave their job to claim the super, no need to sign a declaration that there's no intention to work again. So it's a three year head-start for people retiring at the moment. And by 2024 the preservation age will be 60 and most people won't be able to access their super until age 60 so the advantage will be gone.

 

And whether it's an advantage or not depends on what people value. The longer you wait before accessing your super the more there's going to be and the longer it's going to last all things being equal. For retirees concerned about running out of savings it's going to be a disadvantage to start drawing down on their super.

 

If we're talking about someone with relatively modest super savings who'll be using those savings to pay off the mortgage there's again little significant difference between taking the lump sum at age 57 rather than waiting until age 60. Although you'd need to be able to demonstrate some other source of income I'd think to be able to convince someone that you were genuinely intending to retire.

 

I'm an ATO employee voluntarily providing my time here

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Anonymous

Replies 0

@SebReiter 

 

I agree with some of what your saying as its all about the reality of things .....

 

But Im still not so sure about " genuine intent " under certain circumstances, and a taxpayer can be their own worst enemy if they are not careful so letting them know what the potential consequences is in their best interests, as to what they end up doing is purely a matter for themselves ....

 

Anyway it was great to have this discussion, as it really tests my memory banks and interesting to hear your views ...

 

*** Update .. having discussed this with former colleges I have learned that the reasoning behind the limited striction was that their was concern that taxpayers would treat the concenssion as a green light to simply access super early and without having to do anything and create a free for all ...