"Can I withdraw my superannuation after turning 60 to invest in property?"
- Question from Ken in Brisbane.
Top answer provided by:
Hi Ken, this is a great question, and there are a couple of components to it.
Firstly, I will deal with the technical response to your question.
To be able to access the entire balance of your superannuation you need to have met a condition of release. For anyone born after July 1, 1964, the main conditions of release are turning age 60 and no longer working or turning age 65.*
So, Ken, if you have turned 60 years of age and are no longer working, then the simple answer is yes, you could remove all of your money from superannuation and invest it however you see fit.
My question would be why?
If you are 60 years old and no longer working, you also have the ability to move your superannuation into what is known as the pension phase of superannuation. In this phase of superannuation, the investments within your superfund attract zero income tax and zero capital gains tax. It also means that the payments to you from the superfund have a zero tax rate.
What that means is if you owned a house in your superannuation as an investment, the rent that is paid to the fund is tax-free, and if you sell the house in the future, the gains the fund has made are also tax-free.
The only penalties are that you will need to take a percentage of your superannuation funds value every year as a pension. Starting at 4% at age 60 and rising to 14% by age 90. Please note that these percentages are currently halved as one-off relief due to Covid19. For example, if you are 60 years of age and your superannuation pension is valued at $300,000 on July 1, then normally you would need to pay $12,000 in this financial year as a minimum pension. The value on July 1, 2022, would determine next year’s pension.
Owning direct property such as residential houses inside your superannuation is possible if you have a self-managed superannuation fund, however, if the property is the majority asset, it can pose a complication. Over time the requirement to pay out a larger and large portion of your fund as a pension is likely to require you to sell the property to ensure you can meet the legal requirement of running your superannuation fund.
The pension phase also does not stop the rules around gaining a personal advantage from a superannuation asset, such as living in it. This is not allowed under any circumstances. Additionally, any effort or work that you put into a superannuation owned asset could cause complications. Advice is definitely recommended so that you don’t breach any of the myriads of superannuation rules.
Investigating an alternative investment strategy would be advantageous. Most other investment alternatives are more easily divisible, and therefore paying a tax-free pension is easier. As the old saying goes, you can’t sell off the bathroom to go on holidays.
Ken, to return to your question, the answer is yes you can take your superannuation out if you have turned 60 and stopped work. However, to determine if this is the best way forward I would want to look at your overall tax situation and if there is a better solution for you both now and longer-term.
*Please note that there are other conditions of release, some of which only allow part access to your superannuation.
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