Pre-Retirement Strategies

If you are between 51 and 55 years of age you need to consider a pre-retirement strategy.

You can take advantage of a pre-retirement strategy if:

• Your marginal tax rate is 31.5% or higher (any income above $34,000); and
• Your employer allows you to superannuation salary sacrifice; and
• If you were to superannuation salary sacrifice you have sufficient funds to live (this can be achieved by borrowing money); and
• You are not already contributing the maximum deductible amount into superannuation of $100,000 per year.

If the above applies to you, for every $10,000 superannuation contribution you make, you will be up to $4,650 in front.

Current legislation allows a person of 55 years of age or greater to a Transition to Retirement Pension (This is irrespective of whether they continue work).

Key features of a Transition to Retirement Pension include:

• Income earned in your superannuation fund is exempt from tax; and
• A mandatory pension has to be drawn of between 4-10% p.a. of the members' superannuation account balance; and
• If the pension holder is age 55-59, the pension is taxable if sourced from a tax component; and
• If the pension holder is aged 60 or greater the pension is not taxable; and
• 15% tax offset is available for any taxable pension income.

As access to your money at age 55 is now possible through a transition to retirement pension, this pre-retirement strategy must be considered.