Over the last few months our advisors have been very busy providing clients with Transition to Retirement (T2R) strategies. These strategies allow our clients, over 55 and still working full time, to take advantage of their Superannuation funds to save on income tax. To date we have been working with salary and wage earners, however this strategy works equally as well for self employed persons (and persons with Self Managed Superannuation Funds).
 
A self employed person over age 55 can commence a pre retirement pension with their superannuation and drawdown up to 10% of their account balance as pension payments each year. Rather than salary sacrificing on a regular basis the self employed person simply makes a personal contribution into superannuation at the end of the year and claims a tax deduction for the relevant amount.
 
This can work regardless of whether the member has a managed superannuation fund (eg Colonial, Zurich, BT etc ) or a self managed superannuation fund (SMSF). Obviously if they have a SMSF they need to ensure the trust deed allows for a pre retirement pension (otherwise the deed might need updating).
 
The theory behind the strategy is still the same, being it is more tax effective to draw on your superannuation savings that receive salary and wages / earnings. For those who are self employed it also gives them some stability in knowing they will be getting a monthly income regardless of what is happening with their business.
 
Here’s a recent example that has made one of our clients a very happy person:

A 60 year old public servant on $80,000 pa and with around $200,000 in ‘Super’.

A T2R plan will save her almost $6,000 per year in tax PLUS increase her retirement age balance of ‘Super’ by $46,836.

All this and she still has the same level of weekly income and can easily maintain her current lifestyle.

If you’d like to know more about how a ‘Transition to Retirement’ plan could help you, contact Morse Financial Services or email dustin.bartholomew@morsegroup.com.au.

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