A transition to retirement pension or income stream is where you are able to access part of your superannuation while you continue to work. Essentially, this pension income stream assist individuals who were cutting back on their hours, they are generally in their late 50’s or 60’s and need this additional income from their super fund to support their standard of living.
In the past the benefits of this strategy was that the earnings on the pension account were tax free and where the member was over age 60 the benefits received by the member were also tax free.
So what has changed?
Since 1 July 2017, while the pension paid to a member who is aged over 60 still remains tax free, the earnings on the pension account are now subject to a maximum 15% tax.
So what should you do?
Well if you need the cash, to maintain your standard of living, then you literally have no choice but to continue receiving the T.T.R.
If you can argue that you have retired from the workforce you should consider changing the T.T.R. to an Account Based Pension. See your adviser on how to achieve this.
If you are over age 65, you have met a condition of release so again ensure that this pension payment is treated as an account based pension rather than a T.T.R. Again see your adviser on how to achieve this.
The tax benefits of structuring this pension payment are substantial, in some cases I have seen tax savings of over $15,000 per annum by adjusting the structure or product to ensure the tax is legally minimised.
Should you require further information on transitioning to retirement, please feel free to contact Peter Quinn by submitting an enquiry or calling us on +61 2 9580 9166.
The information in this document does not take into account your personal objectives, financial situation or needs and so you should consider its appropriateness having regard to these factors before acting on it. It is important that your personal circumstances are taken into account before making any financial decision and it is recommended that you seek assistance from your financial adviser.