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Is the taxpayer, a member of a superannuation fund, required to cash out his benefit in accordance with regulation 6.21 of the Superannuation Industry (Supervision) Regulations 1994 (SIS regulations) once he attains age 65, where the taxpayer was not gainfully employed for at least 240 hours in the previous financial year?

Yes. The taxpayer, a member of a superannuation fund, is required to cash out his benefit in accordance with regulation 6.21 of the SIS regulations as soon as practicable after attaining age 65 as the taxpayer was not gainfully employed for at least 240 hours in the previous financial year.

The taxpayer turns 65 early in the financial year.

The taxpayer has benefits in a regulated self managed superannuation fund.

The taxpayer is not currently employed and was not gainfully employed in the previous financial year.

The simplified cashing rules were introduced by the Superannuation Industry (Supervision) Amendment Regulations 2004 (No. 4) 2004 No. 148 and are effective from 1 July 2004.

Under regulation 6.21(1)(a) of the SIS regulations member's benefits, that are not post-65 employer-financed benefits, must be cashed if the member: • has attained age 65 but not age 75; and • is not gainfully employed to at least a part-time equivalent level.

The taxpayer has not been employed since attaining the age of 65 so none of the benefits in the fund will be post-65 employer-financed benefits.

Under SIS regulation 6.21(6), 'gainfully employed at a part-time equivalent level' is defined to mean 'gainfully employed for at least 240 hours during the financial year that ended on the last occurring 30 June'.

The taxpayer turns 65 early in the financial year. The taxpayer is not treated as being gainfully employed to at least a part time equivalent during the financial year because he was not gainfully employed for at least 240 hours in the immediately previous financial year. Any member benefits must be cashed as soon as practicable after attaining the age of 65.

The term 'cashed' is not defined in the Superannuation Industry (Supervision) Act 1993 or in the SIS regulations. However, the term has been interpreted in a manner that is consistent with its ordinary meaning where cashing necessarily involves the actual payment of the cash, assets or other consideration for the benefit of the beneficiary. The use of the term within the SIS regulations indicates that in order to be 'cashed', the benefits need to be paid out of the superannuation system. Note: Regulation 6.21(1)(a) of the SIS regulations is subject to Modification Declaration No 24 registered on 6 May 2005. This provides for a transitional period from 1 July 2004 to 30 June 2005, during which time trustees are not required to compulsorily cash benefits in accordance with regulation 6.21(1)(a).