Transition to retirement strategies = less tax and more in your pocket!
Are you 55yrs+ and are you beating the taxman?EARN MORE MONEY ON THE SAME INCOME THROUGH SUPERANNUATION TAX STRATEGIES.
You can access a transition to retirement pension of between 4-10% of your account balance if you’ve reached preservation age (currently 55) and you are still working.
If you are under 60, part of your pension payments will be taxed, but you may receive a 15 per cent tax offset on the taxable component. Once you have reached age 60, all pension payments are tax-free including lump sums.
How does the Transition to Retirement Strategy work in practice?
John is 60 and earns $70,000 p.a. He has accumulated $140,000 in his superannuation fund. With the help of his Senior Financial Planner, John is keen to implement a Transition to Retirement Strategy whereby he elects to salary sacrifice $18,000 p.a. and draw a superannuation pension of $14,000 p.a.
|INCOME||WITHOUT STRATEGY||WITH STRATEGY|
|PAYG Tax Paid||$15,378||$9,3218|
|Change In Net Cash||–||$2,160|
|Superannuation Asset||$145,504*||$146, 804**|
|Increase In Super||–||$1,300|
|Net Benefit Of Strategy||–||$3,460pa|
|Tax On Earnings Savings||–||$5,250***|
|Benefit Of Strategy To Retirement||–||$22,550|
*Balance of $140,000 plus super contribution of $6,475 (less 15% contribution tax)
**Balance of $140,000 plus super contribution of $24,475 (less 15% contribution tax) less $14,000 in pension payments
***Additionally, the income earned by the assets of the fund would no longer be subject to income and capital gains tax of up to 15%. eg. 5% earnings on a balance of $140,000 attract tax of $1050p.a, which would not be payable in pension phase.
In the above scenario, this would improve the overall benefit to retirement by approx. $22,550.
People with higher balances and taxable income will have higher tax savings.
Seek Professional Advice
Transition to retirement provisions can mean reducing your working commitments and pressures without necessarily reducing your standard of living. There are, however, various levels of complexity and the strategy is not suited to all investors.
Only a Financial Planner can help you determine the best approach for you. Ensure your retirement planning is on track by seeking professional advice.