Transition to Retirement Income streams were originally introduced in July 2005 to help Australians who wanted to transition to retirement via part-time work. By starting a TTR, you don’t have to retire to withdraw your super benefits. You can work part-time or full-time or even casually.
There are three major potential benefits available.
Boost your super savings
With a transition to retirement income stream you can continue to work and add to your super account, while also withdrawing super from a separate income stream account.
The increase in the general concessional contributions cap to $30,000 (from $25,000), effective from 1 July 2014 and the special $35,000 cap for those 50 and over has generated greater interest in the popular transition-to-retirement pension/salary sacrifice strategy.
Your super balance will keep growing as your employer continues to make contributions into your super account. Salary sacrificing some of your pre-tax income into your super will further boost your super savings.
A transition to retirement income stream could enable you to:
- use additional income from your super to pay off debts while you’re still working
- boost your super before-tax with salary sacrificing while also withdrawing super through your income stream
Pay less tax
Employer contributions and salary sacrificed contributions are taxed at a low rate when they go into super. This is likely to be lower than your marginal tax rate.
Investment returns on a super pension account are not taxed, and when you turn 60, you won’t pay any tax on your pension income. Even if you are under age 60 you will get a tax offset on your pension income.
Ease into retirement
If you want to reduce your work hours as a way of easing into retirement, a transition to retirement pension can be used to supplement your employment income if your reduced income is not quite enough to maintain your current lifestyle.
The key message many advisers may use when recommending a TTR is: most Australians who have reached their preservation age can boost super savings while cutting their tax bill, depending on an individual’s level of income and marginal tax rate.
If you’re considering such a strategy or considering reviewing an existing strategy, then seek taxation advice on the merits of such a strategy for your personal circumstances
Your Adviser will be able to discuss the importance of superannuation and the benefits available to you specifically. Why not schedule a meeting now?
Disclaimer
Information current as at 23 July 2015
The advice is general in nature only and does not take into consideration your financial situation, goals or needs. Before making any investment decision you should consider the appropriateness of the information to your circumstances and obtain a copy and read the Product Disclosure Statement. Please seek expert advice prior to acting on this information.