19th Oct, 2010
There’s no reason to stop working if you’re not ready and you don’t need to be fully retired to access your super.
If you’re over 55 and have some super already, the ‘Transition to Retirement’ rules could help you boost your super savings significantly without cutting back on your lifestyle.
Who does this suit?
This strategy generally works best if you:
· are aged 55 or over;
· are still working full-time; and
· have some existing super.
How does it work?
The ‘Transition to Retirement’ rules allow people who are 55 or over to access their super while still working. Basically, they allow you to roll some or all of your current super into a ‘non-commutable’ income stream which pays you a regular income but does not allow you to withdraw a lump sum.
Now that you have more money coming in, the next part is to salary sacrifice your earnings into super. Because salary sacrifice uses before-tax dollars, you can actually contribute more to super than you withdraw, without missing the income.
For example, if you earn $100 and you are on the highest marginal tax rate (including Medicare levy), you would have to pay $46.50 to the government in tax. If you salary sacrifice the same amount, you only pay 15% tax on the contribution or $15. That’s an extra $31.50 going into your super instead of to the government.
Benefits
You get to put more money into super without feeling the reduction in your net cash.
At any stage, salary sacrifice is one of the most effective strategies there is to boost your super savings. Because it uses pre-tax earnings, you lose less money to tax and get more in your pocket.
Also don’t forget you may be able to take advantage of other government incentives like co-contributions and spouse contributions to boost your super and earn tax offsets.
You will need to check the Product Disclosure Statement of your superannuation product to see if it offers a non-commutable income stream option.
If you are ready to Transition to Retirement please contact Scott Partners. We will take the time to walk you through the processes and issues that may be specifically relevant to yourself.
Disclaimer: This information is for General Use only. Scott Partners does not give or imply any advice in the above information. To the extent permitted by applicable law, neither Scott Partners nor any person or entity involved in creating, producing or distributing the information available on this website will be held liable under contract, tort (including negligence), statute or otherwise for any loss, damage or injury of whatsoever kind suffered or incurred by anyone arising out of access to or the use, reliance or misuse of or inability to use this website or its contents or Scott Partners failure to provide access to any websites or information updates.
