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.