Introduction
Superannuation benefits are classified into three preservation categories:
- Preserved benefits (PB)
- Restricted non-preserved benefits (RNPB)
- Unrestricted non-preserved benefits (UNPB)
From 1 July 1999, all new contributions (whether from a member or employer) and all investment earnings accrued in a regulated super fund (in accumulation phase) must be preserved. This means they cannot be accessed until a condition of release is met. The most common conditions of release are discussed in this guide.
RNPB components generally consist of certain employment-related contributions and undeducted member contributions (now known as non-concessional contributions) made before 1 July 1999. These amounts were crystallised as at 30 June 1999 and do not increase, except when rolled over from another fund that contained RNPB. Importantly, pre-1 July 1999 Superannuation Guarantee (SG) contributions and earnings on RNPB are classified as PBs and do not form part of RNPB.
Once a member satisfies a condition of release with nil cashing restrictions, PBs and RNPBs become UNPB. RNPBs may also become UNPB if a member terminates employment with an employer who contributed to the same fund and requests the conversion. However, rolling over RNPB components to another fund before terminating employment may delay access.
Once benefits become UNPB, they can be withdrawn as a lump sum or an unrestricted income stream at any age, regardless of work status. UNPBs generally remain in this category indefinitely, with positive earnings on an account-based pension in the retirement phase adding to UNPB.
It is important to note that the preservation status of superannuation benefits does not affect how they are taxed upon withdrawal. For example, UNPBs are not automatically tax-free when accessed.
Accessing Super Benefits and Conditions of Release
Meeting a condition of release allows a member to access their preserved and restricted non-preserved benefits. Some conditions permit lump-sum withdrawals or an unrestricted income stream, while others impose cashing restrictions.
The conditions of release and their associated cashing restrictions are detailed in Schedule One of the Superannuation Industry Supervision Regulations (SISR). Table 1 summarises these conditions and restrictions.
| Condition of Release | Cashing Restriction |
| Retirement | Nil. Access to a lump sum or unrestricted income stream. |
| Attaining age 65 | Nil. Access to a lump sum or unrestricted income stream. |
| Permanent incapacity | Nil. Access to a lump sum or unrestricted income stream. |
| Terminal medical condition | Nil, but tax complexities arise if rolled over to another super fund. |
| Temporary incapacity | Non-commutable income stream for the duration of incapacity. |
| Death | Nil. However, restrictions apply on beneficiaries and payment structures. |
| Severe Financial Hardship | One lump sum per 12 months, between $1,000 and $10,000. |
| Compassionate Grounds | Lump sum capped at a reasonable amount as determined by the Regulator. |
| Termination of gainful employment (<$200 balance) | Nil. |
| Termination of gainful employment with employer contributing to the fund | PBs: Non-commutable lifetime pension or annuity. RNPBs: No cashing restrictions. |
| Attaining preservation age | Access via a transition to retirement income stream or other non-commutable pensions. |
| Former temporary resident | Lump sum withdrawal equivalent to account balance. |
| Release authorities (e.g., Division 293 tax, excess contributions, First Home Super Saver Scheme withdrawals) | Lump sum withdrawal up to the stated release amount. |
Conclusion
Understanding the preservation rules for superannuation benefits is crucial for effective retirement planning. Superannuation benefits remain preserved until a condition of release is met, with varying levels of access based on whether they are PB, RNPB, or UNPB. For individuals planning withdrawals or income streams, knowing these rules ensures strategic decision-making and maximisation of retirement savings.
As always, it is advisable to seek professional guidance when dealing with superannuation access and taxation matters.