How does it work?
If you're 55 and still working, a transition to retirement strategy can make a difference to your super, improve your tax position and, if set up appropriately, can maintain your current level of income.
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You salary sacrifice (a pre-arranged deduction from pre-tax salary) some of your salary into super; you will only pay 15% tax on your contribution, rather than paying your marginal tax rate if it was taken as salary. |
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How much you salary sacrifice will depend on how much you're earning. If you choose to sacrifice, you are effectively reducing your assessable income with the aim of bringing your income tax down. |
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Then, to maintain the same level of income, you draw a pension from your super fund. As of 1st July 2007, some of the pension income drawn under age 60 may be tax-free, and/or subject to a tax offset. Any withdrawals, including pension payments after age 60 are tax-free. |
 Who is eligible?
Most employees over 55 will benefit from a transition to retirement strategy. To gain the maximum benefit from this strategy you'll be working, on a higher income and aged 60 or over. However, most workers 55 or older can also benefit from this strategy.
Additional Information
The exact amount of income you draw from your super can be tailored to suit your lifestyle and financial commitments. Whether you want to work part-time or full-time and the amount you currently have in super are also factors which determine how much you draw from your super. A variety of transition to retirement strategies can be built for you according to your income needs and whether you can afford to reduce your annual income and thereby increase your super savings.
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Salary sacrifice no longer reduces your assessable income for the purpose of calculating
your eligibility for the Government Co-contribution, effective 1 July 2009
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What are the next steps?
Talk to your Financial Adviser to see if you can benefit from a Transition to Retirement Strategy. Need a Financial Adviser? Click here. |