What a great deal! If you are aged 55 or more, here’s how you can lower your tax bill and boost your retirement savings which will assist in a more comfortable life in retirement.
Transition to retirement (TTR) strategies offer workers aged 55 or more the opportunity to further boost their retirement savings. The main points of the strategy are as follows:
- Once you are age 55, you can start a pension with your superannuation.
The pension income is taxed between the ages 55 and 59, but receives a 15% tax offset. From age 60, this pension is tax free.
- Your money is invested in the tax-free superannuation pension phase, rather than taxed up to 15% in the superannuation accumulation phase.
- You salary sacrifice your wage to superannuation equivalent to your superannuation pension income and the superannuation fund pays tax at 15% rather than at your marginal tax rate
- Income streams drawn while still working must total between 3% and 10% of the total TTR account balance at the commencement of the first income payment in a 12-month period.
The key is to structure your arrangements to replace the sacrificed income with income from the superannuation pension.
TTR strategies are extremely tax effective for people who have a reasonable amount in superannuation and high incomes. Furthermore, you should check if your employer can accommodate salary sacrifice arrangements so that they are able to make tax-deductible superannuation contributions.
The strategy is used to boost your superannuation as you near retirement through the tax savings available. Alternatively, it can be used to reduce your hours of work but maintain your available income. Whichever, the aim is to create a new lifestyle as you make the transition from full-time work to part-time work, and later to retirement.
As there are many tax implications with the movement of money in and out of your superannuation fund, and mistakes could be costly, it is wise to seek the advice from a qualified ipac financial adviser who can construct a strategy suitable for your needs.