The law defines retirement as something more than stopping work. It occurs when you reach preservation age, cease employment (which can happen before preservation age) or intend never to work again for 10 or more hours a week.

Preservation age is 60 for anyone born on or after July 1, 1964.

Reducing work hours to less than 10 a week doesn’t cut it as there must be a full and effective termination of employment. All entitlements, including accrued unused leave, must be paid out.

Take Tom, who is a beneficiary and employee of a discretionary trust which carries on a business. At age 59, he stops working for the trust and is paid out his entitlements. On turning 60 on July 15 the trustee of Tom’s SMSF is satisfied he intends never to work again and commences paying him an account-based pension.

But what if Tom continues to perform substantive duties for the trust – much the same as when he was an employee – and receives trust distributions?

Passive income such as distributions and dividends from a trust does not normally affect retirement under super law as this income is not a direct result of personal exertion.

But where a business is operated via a family trust or private company, and someone is performing substantive duties for that trust or company, there may well be an ongoing relationship.

If Tom's work increases business turnover resulting in larger trust distributions, there’s every chance the arrangement under which Tom was employed has not ended as he’s still receiving 'reward' for his efforts – just not as wages.

The fact that Tom continues to assist the trust by performing essentially the same duties he did as an employee means he did not satisfy the retirement condition of release.

But let’s say Tom does no further work for the trust.

At 61, he makes a personal deductible contribution to reduce capital gains tax on an investment property he sold.

This contribution (with earnings) is preserved, but as Tom’s circumstances haven’t changed, he can access his benefits under the retirement condition of release.

If he accesses this benefit shortly after making the contribution, it should be as an account-based pension – not lump sum – otherwise it could be considered an arrangement done purely for tax reasons and the deduction may well be denied as the contribution was clearly not for the purpose of providing for superannuation benefits.

But let’s say Tom doesn’t touch this contribution (with earnings) and it remains preserved.

Then at age 62 he returns to the workforce. He works 15 hours a week and his employer makes Superannuation Guarantee contributions.

Tom cannot access his preserved benefits – including the contribution (and earnings) from the investment property sale he made at 61 – as he’s left it too long, his circumstances have changed, and he doesn’t satisfy the retirement condition of release at this time.

‘Deemed’ retirement

If you are aged 60 to 64, retirement for superannuation purposes occurs when you cease an employment arrangement, even if you intend to work again.

Super accrued up to the date you ceased employment is accessible but any contributions – employer and personal – after this date, including any cashed out and re-contributed amounts, are preserved.

Termination of employment, including self-employment, must be on a genuine basis – it cannot be a contrived arrangement or sham just to access your super.

For example, orchestrating a “Friday arvo termination, Monday morning recommencement arrangement” purely to access super is not on.

With an SMSF, you need to be extra diligent when assessing whether you’ve satisfied a condition of release as you have a vested interest in accessing your own benefits.

Take Rani (62) who has a private company – she is both a director and employee.

Rani ceases working in the company – handing that role over to her son – and is paid out her full entitlements but it being her company, she remains a director.

Although Rani is still a director, she has ceased being an employee and can access her super.

Then there’s Bob – a consultant who contracts his skills to companies. A 12-month contract comes to an end when he’s 61 and he’s hoping to pick up another contract.

Bob wishes to commence an account-based pension because he wants to move his super into the tax-free retirement phase.

While this particular contract has ended, the arrangement under which he is gainfully employed has not – Bob is and remains a contractor. Thus, Bob does not satisfy the retirement condition of release and cannot commence an account-based pension. Liken this to an electrician who finishes a job for a customer but they’re still gainfully employed as a tradeperson.

Bob needs to sell his business or wind it up, cancel his ABN and receive no more income.

Now let's consider Ray (63) and Sylvia (61), who run an Airbnb.

Sylvia wants to access her super, so she stops taking an active role in running the Airbnb and directs all income to Ray.

Accordingly, the retirement condition of release is met by Sylvia.

Should Sylvia resume participating in running the Airbnb and perform substantive duties, the ATO may question whether her ‘retirement’ was bona fide or just a contrived arrangement.

If you wish to access your super once you reach preservation age but still work, a transition to retirement income stream (TRIS) may be for you.

Be mindful that if you commence a TRIS make sure you do it with the intent of running an income stream, not to get money out of super by taking the maximum 10 per cent payment then transferring it back to accumulation phase.

The ATO has said a pension comprising only one payment does not qualify as an income stream. And if you’ve accessed your super while still working without it being a TRIS, that’s unlawful early access.