You’ve worked hard and now planning for retirement, and thinking of the type of lifestyle you’d like to enjoy….buying that beach house or taking a long overdue holiday – maybe the trip around Australia in the RV?
If you’re starting to think about life after work, then it’s time to think about reviewing your super and build up your retirement savings. If you’ve reached the preservation age (between 55 and 60 depending on your date of birth) and already have some super accumulated, a Transition to Retirement strategy could help you boost your super savings without impacting your lifestyle. You may even be able to reduce your hours at work and supplement your salary with income from your super fund.
Transition to Retirement strategies to consider:
- Boost your super without changing your lifestyle
You continue to work full time, make contributions to your super via salary sacrifice, and top-up your reduced salary with income from a Transition to Retirement Pension. Any salary sacrifice super contributions are taxed at 15% instead of your individual income tax rate (providing your concessional contributions are under the cap and your income is below $300,000).
- Reduce your hours but keep your income
Reduce your work hours but replace your reduced salary with income from a Transition to Retirement Pension. You will be taking from super savings earlier than might otherwise have been the case, so this will have some long term impact on your super.
In most instances, income you receive from a Transition to Retirement Pension is taxed at a lower rate than your salary.
- Tax concessions – if you’re between preservation age and 59, your Transition to Retirement Pension income is eligible for a 15% tax offset
- Tax-free income – if you’re aged 60 or over, your Transition to Retirement Pension income is tax-free
- Tax-free investment earnings – the assets backing your Transition to Retirement Pension generate tax-free investment earnings, which would otherwise have been taxed at up to 15%.
So is a Transition to Retirement strategy right for you?
Before commencing a Transition to Retirement Pension there are some points to consider:
- You must reach your preservation age, which is between 56 and 60 depending on your date of birth before you can consider a TTR strategy.
- There are minimum and maximum limits on the income you can draw down, and this is set by the Government.
- You cannot make lump sum withdrawals from your Transition to Retirement Pension until your retirement or reaching age 65.
- If you salary sacrifice too much you may end up paying additional tax which could erode the benefits of the strategy.
You should discuss with your financial adviser whether a Transition to Retirement is the best option for your personal circumstances. If you’d like more information on whether a TTR strategy could be right for you from a tax perspective, please talk with the super experts at PJT today on 07 5413 9300.
GENERAL ADVICE WARNING: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.
PJT Accountants & Business Advisors Pty Ltd CAR Number 1243046 ABN 75 116 182 873 is a Corporate Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361
Jodie Thompson ARN 277884, Wayne Patten ARN 277883, Matthew Dunn ARN 1243039 are Limited Authorised Representatives of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361