Salary Sacrifice & New Super Rules for Over 50s
Transition to Retirement - Boost Your Super, Pay Less Tax & Retire On Your Terms
With the right advice you can substantially boost your super and retirement savings without working any harder or reducing your lifestyle.
The new super rules allows you to access your super prior to retirement, provided that you have reached your preservation age - from age 55.
As a result you can salary sacrifice a larger component of your salary into super whilst commencing a pension (Non-Commutable Allocated Pension (NCAP)) from your super.
Creating a substantial tax benefit!
This strategy can be used by people who want to reduce their work hours and supplement reduced employment income with pension income or by people who want to remain in full-time employment and wish to boost their retirement savings.
Why would you commence a pension from your super while you work and salary sacrifice a larger component of your salary into super?
For the tax benefits!
We have a range of super strategies that can help you:
- Salary sacrifice contributions are taxed at 15% going into super. So for every dollar salary sacrificed into super 85c will be invested. Where as if you elected to take this money in cash, for every dollar earned you pay tax at your marginal tax rate - up to 46.5%. This represents a tax-free saving of up to 31.5%
- Super pensions pay no income (interest or dividends) or capital gains tax on investment earnings.
- If you're between the ages of 55 and 59, pension income paid out will attract a 15% tax rebate.
- For taxpayers aged 60 years plus, pension income paid out are also tax-free.
Let’s look at an example:
Jill, aged 55 earns a salary of $70,000 per annum and has $450,000 in super. She commences a pension while she works and salary sacrifices enough income into super so that her after tax income doesn't change.
Jill elects to receive a pension of $13,079 and salary sacrifices $17,436 into superannuation. As shown in the table below, this does not change her after tax income.
The estimated increase in Jill’s super as a result of using this strategy is as follows:
By taking advantage of the transition to retirement rules, Jill could generate an additional $84,477 in retirement savings by the age of 65.
S.O.S Accountants can help. Call us on 02 9588 9588 or Contact Us via our online form to make an enquiry.
The information in the above example is of a general nature and is not intended to meet your individual needs and objectives. Please do not act on any information within this example before seeking advice from a qualified professional. While we believe that this material is correct, no warranty of accuracy, reliability or completeness is given and, except for liability under statute which cannot be excluded, no liability for errors or omissions is accepted.