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What is the accumulation phase in superannuation?
When you’re working, and money is coming into your superannuation account, it’s the accumulation phase of the super. Your super balance will increase as a result of mandatory super guarantee payments from your employer and any voluntary contributions you choose to make. Your fund invests your money and earns returns which further increases your super savings.
This accumulation phase of your super starts from the time you begin earning and continues until you set up a super income stream or withdraw your savings as a lump sum. After this, it’s in the retirement phase, which used to be called the pension phase until recently. It is not mandatory to convert your super from an accumulation to a pension phase just because you have reached your preservation age.
If you continue to work after setting up a pension, your employer contributions will keep coming into an accumulation phase super account. So you may have part of your super balance in the accumulation phase and part in the retirement phase.
You generally cannot access your savings in the accumulation phase unless you meet a condition of release, which could be any of the following.
- Reaching your preservation age and retiring. Depending on which year you were born, your preservation age could be between 55 and 60.
- Reaching your preservation age and beginning a transition-to-retirement income stream (TRIS). These help you to gradually move into retirement by accessing a limited amount of your super. You can choose to move from full-time to part-time employment and supplement your part-time income with a top-up from your TRIS. You can only receive a maximum amount of 10 per cent of your account balance from TRIS, which is not in the retirement phase.
- Ceasing an employment arrangement after you become 60.
- Crossing the age of 65.
Disclaimer
This article is over two years old, last updated on September 19, 2022. While RateCity makes best efforts to update every important article regularly, the information in this piece may not be as relevant as it once was. Alternatively, please consider checking recent superannuation articles.
Converting from accumulation phase to retirement phase
When you want to convert your account to a retirement or pension phase, you will need to inform your super fund and fulfil the formalities they require. You can transfer a maximum amount of $1.7 million to the retirement phase, as this is the transfer balance cap -- a lifetime limit on the total amount of superannuation that can be transferred into tax-free retirement phase income streams, pensions and annuities.
What is the tax on my super in the accumulation phase?
Employer contributions and your pre-tax super contributions made through a salary sacrifice arrangement are generally taxed at the concessional rate of 15 per cent. The cap on such concessional contributions each year is $27,500; beyond that, you will have to pay a higher tax rate.
Your super fund invests your money to earn returns. These investment returns during the accumulation phase of your super are generally taxed at 15 per cent, while in the retirement pension phase, these earnings are tax-free.
Members of self-managed super funds (SMSFs) may also have money in the accumulation and retirement phases. This means that income earned on the assets of the fund will not be completely tax-free. The fund will need to pay tax on a proportion of the returns if some of the accounts are in the accumulation phase. SMSF trustees are legally required to keep records of the fund’s transactions, and they need to track accumulation and pension phase accounts separately.
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