CFS provides clarity on retirement definition for directorships
Confusion remains around whether a member has retired for superannuation purposes where they have resigned from a director role, according to a technical expert.
Colonial First State executive manager Craig Day said while most practitioners are well aware that where a client over the age of 60 and has ceased an arrangement of employment, and they have technically retired, there remains a lot of misunderstanding around what happens where the client has left a directorship.
“I can’t tell you how many times over the past 12 months I’ve been asked whether resigning from a directorship means that member has met the condition of retirement,” said Mr Day.
“The important thing to understand is that under common law, a director is not an employee under a company. A directorship is an office that you hold. You are not gainfully employed, even if you get paid director's fees this does not make you a common law employee.”
This may be different he said where the individual was an executive director, he explained, because that involves making decisions and working within the business.
“If you are an employee, then there will be an employment contract in place between the company and [yourself], otherwise you are simply a director and resigning the directorship does not mean you're terminating your employment,” he said.
Mr Day also noted that while the company may have paid SG to the director, they may only be considered an employee for SG purposes but not for superannuation.
“So keep that in mind that just because they’re paid SG, it doesn't mean they're an employee for these purposes,” he said.
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.