Max my Retirement

Grow your super without reducing your income

If you’re aged 55 or over and plan to keep working, you may want to sacrifice some of your pre-tax salary into a super fund and use a transition to retirement pension to replace your reduced salary

What are the benefits?

By using this strategy, you could:

  • Take advantage of a tax-effective income stream investment while you are still working, and
  • Build a bigger retirement nest egg without reducing your current income.
How does this strategy work?

This strategy involves:

  • Arranging with your employer to sacrifice part of your prospective pre-tax salary directly into a super fund,
  • Investing some of your existing preserved or restricted non-preserved super in a transition to retirement pension (TRP), and
  • Using the regular payments from the TRP to replace the income you sacrifice into super.

By taking these steps, it’s possible ot accumulate more money for your retirement, due to a range of potential benefits, including:

  • Less tax on contributions, as salary sacrifice super contributions are generally taxed at up to 15%, rather than at marginal rates of up to 46.5%.
  • Less tax on investment earnings, as earnings in a TRP are tax-free, whereas earnings in a super fund are taxed at a maximum rate of 15%, and
  • Less tax on income, as the taxable income payments from the TRP will attract a 15% pension offset between age 55 and 59. Also, when you reach age 60, the income stream payments you receive are tax-free and you don’t have to include these amounts in your annual tax return (which could reduce the tax payable on your non-super investments).

Note: This strategy could also be used if you are self-employed. Rather than making salary sacrifice contributions, you need to make personal deductible super contributions.

To find out if a strategy like this will help you, please book a meeting.

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