Transition to Retirement with Super Stream

Transcription

1 Transition to Retirement with Super Stream

2 What is transition to retirement? Transition to retirement rules allow Australians who have reached their preservation age, access to their superannuation while they are still working. This means that if you are approaching retirement you could reduce your work hours, and supplement your reduced employment income with tax-effective income from your super. However, there is no requirement to actually reduce your working hours to start a TTR pension. This opens the door to some other tax-effective strategies, even if you re still working full-time. Save tax and boost your super! If you plan to keep working full-time, you could sacrifice some of your pre-tax salary into your super fund and use the income from the TTR to replace your reduced salary. This could enable you to build a bigger retirement savings account balance without reducing your current income. How do the tax savings work? You can reduce the tax you pay on your income by salary sacrificing (contributing part of your before-tax income) to super. This income would normally be taxed at your marginal rate, but when you contribute to super, you generally pay 15%* tax [ up to certain limits}. How the income drawn from a TTR pension is taxed depends on your age: Under 60 years of age Part of the income you draw from super is taxed at your marginal rate. However, you receive a 15% tax offset in your income tax return each year. Depending on your circumstances, part of the income may be tax-free Over 60 years of age The income you draw from super is tax-free. *People earning over $250,000 per year pay 30% tax

3 The key rules TTR pensions can only be started by people who have reached superannuation preservation age [55 if you were born before 1 July 1960]. Must be set up using superannuation money. Pension payments capped at a minimum of 4% p.a. and a maximum of 10% p.a. usually until the earlier of retirement or attaining age 65. Lump sum withdrawals are generally not allowed. Same social security implications as ordinary account-based pensions. Investment earnings will be taxed at up to 15%.

4 Know your limits If your TTR strategy involves making additional beforetax super contributions, you need to be aware of your concessional contributions cap as you may be penalised if you exceed this limit. The current concessional contributions cap is $25,000. This cap includes your employer s Superannuation Guarantee contributions, any salary sacrifice into super, or any personal super contributions on which you can claim a tax deduction. *Please note that both caps have been proposed to change to $25,000 from 1 July When do you reach your preservation age? Your preservation age is the age you must reach before you can access your superannuation and depends on when you were born. The following table will help you calculate when you can access your super: Date of birth Before 1 July July June July June July June July June From 1 July Preservation age

5 TTR case study Dean, aged 60, earns a salary of $52,000 pa, as well as the standard 9.50% Superannuation Guarantee [SG] contributions. He wants to boost his current super balance of $150,000 while maintaining his current after-tax income. To help him achieve these goals, Intrust360 recommends the following: continue to hold an accumulation account such as Core Super start a Super Stream pension account using $140,000 of his super balance elect to receive income from the pension account of 10% of his account [$13,550] and salary sacrifice $20,000 into his Intrust Super accumulation account. Year one Existing Proposed Pre tax salary $52,000 $32,000 Employer super contributions $4,940 $4,940 Salary sacrifice $0 $20,000 TTR pension income $0 $13,550 Total pre tax income $52,000 $45,500 Less tax payable -$9,267 -$2,817 After tax income $42,733 $42,733 Dean will now have two income streams but will achieve the same take home income. Due to the salary sacrificed amounts being taxed at 15%, Dean will save thousands of dollars in tax which will be added to his super account. Existing Proposed Income tax $9,267 $2,817 Plus contributions tax [salary sac and SG] + $741 + $3,741 Total $10,008 $6,558 The tax saving will go straight into his super account, boosting Dean s retirement savings in the first year by $3,450! The TTR strategy worked for Dean and it could work for you! Case study assumptions: $140k of super balance transferred to TTR pension. SG contributions continue to be based on salary of $52,000 p.a. Dean is single and will commence the strategy on 1 July 2017/18 tax rates apply No other assessable income

6 Pension Stream Hotline Phone Visit Level 15, 324 Queen Street Brisbane QLD 4000 Mail Locked Bag 5042 Parramatta NSW 2124 Fax Web intrust.com.au Visit Level 10, 270 Adelaide Street Brisbane QLD 4000 Mail GPO Box 2755 Brisbane QLD 4001 Phone Fax Web intrust360.com.au The information contained in this document is of a general nature only, and does not take into account your individual situation, objectives and needs. You should consider the appropriateness of the general information having regard to your own situation before making any investment decision. A Product Disclosure Statement is available at intrust.com.au or call us on for a copy. While Intrust Super has no reason to believe that this information will not provide an accurate view of the material covered, Intrust Super does not accept liability for any errors or omissions in the content of this information. Issued by IS Industry Fund Pty Ltd MySuper Unique Identifier: ABN: AFSL No: RSE Licence No: L Intrust Super ABN USI/SPIN: HPP0100AU RSE Registration No: R IS Financial Planning Pty Ltd ABN trading as Intrust360 is a wholly owned subsidiary of IS Industry Fund. Intrust360 is a corporate authorised representative of Adviser Network Pty Ltd ABN: AFSL: Corporate Authorised Representative Number: