How a Transition to Retirement Pension Works – General Presentation

Hi, my name is Andrew Perkins from instruction Financial Solutions. Today I’m just going to go through some general information about how our transition to retirement pension works and how they benefit. You.

Important to note that this is general advice in May, you may have different circumstances you should speak to a financial adviser prior to acting on this information. A couple of assumptions I’ve used in the information I’m providing.

First of all, taxable income of 55,000 over 16 years of age, which means you your HP those super pension is tax free transition to retirement pension of just for example, say 150,000 drawing a pension of 6550 per annum and a marginal tax rate of 32 and a half percent and Medicare levy of 2%. So to understand transition to retirement, you need to understand salary sacrifice. So normally for each $100 you earn if you’re earning more than paid or 45,000 you pay $34.50 in tax and Medicare levy and you leave you didn’t use $65.50 for you to spend. However the salary sacrifice into super, then for each $100 you salary sacrificed, the tax officer would get $1,515.80 $5 to go to your super fund.

So if you say you can save $200 per fortnight after tax and you can actually celebrate salary sacrifice 205 And your pain pay will only increase by $200 a fortnight. So moving on to the transition to retirement pension So as per the assumptions if you’re over 60 years the 100% of super pension paid which is tax free so there’s no tax it doesn’t even go on your tax return. So you receive that in your as your transition every time it strikes the aim of the strategy to replace your net income so that your net income is after tax with your transition to retirement pension and then salary sacrifice equivalent gross income into your superannuation. So the result is a difference of the salary sacrifice of 15% and the mod the tax you would pay in the Medicare levy pay so the difference is 19 and a half percent. So by doing both using the strategy you are saving approximately nine and a half percent in tax.

So in doing that you’re actually drawing from your superannuation. So in the assumptions again, there was $150,000 in Super, so use those to start your transition to retirement you draw a pension of 6550 which is the minimum roughly the minimum pension This is equivalent to $10,000 of normal gross income. So yes, so you said salary sacrifice that $10,000 to super. So the net result is if you just follow that through, you still receive the same income so it doesn’t affect your income you receive. However, you’re going to save nearly $2,000 in tax so that’s $2,000 to you in your pocket each year through tax savings, and those tax savings will be in your superannuation fund.

So here are the numbers. So you start off now you’re earning 55,000 you’re paying your tax you end up with 45,558 however, apply that. Use that using our transitional retirement pension, you received your 55,000 you put $10,000 into super so your taxable incomes 45,000 So you’re paying less tax, and you replace that amount your salary sacrifice with your transition to retirement pension leaving you with exactly the same after tax income. So putting the money into superannuation you actually pay some tax on that. Those contributions However, compared to not salary sacrificing and not using the transition to retirement pension, you would be paying $9,452 tax using this strategy using a strategy with a transition to retirement pension. Your will pay roughly just under $7,500 tax saving you nearly that $2,000 in taxes $2,000 per year of benefit.

So as indicated the transition Retirement and Pension strategy effectively replaces your current income with a simpler pension and then you make additional contributions to superannuation. To save tax need to meet a condition or release. So why while you’re working cannot access your superannuation to age 65. So however, the transition to retirement pension provides you with limited access to effectively increase the amount of superannuation you have when you get to retirement. So how does this tax a sector of retirement plan look like? Well, you could do nothing. Nothing would mean you continue to pay your tax and Medicare levy at 34 and a half percent though nothing gained nothing lost. You could just salary sacrifice if you don’t need the extra income and you could salary save about 90 and a half percent in personal tax and Medicare tax based on salary sacrificing $10,000 You don’t even have to do salary sacrifice the full $10,000 So if you’re not spending if you don’t if you’re actually saving some money you could use some of that to contribute into super well you can use as a transition to retirement replace after tax income with tax free income from Super salary sacrifice that tech pre tax equivalent from of the super pension and you receive there’s no net difference.

No difference in your net income. And you save nearly $2,000 So you’re getting an extra $2,000 into your super fund each year through the tax savings. Just a warning there and that’s why it’s a general advice is there may be caps of the amount you can put into super and receive a tax deduction through salary sacrifice or through personal contributions.

Next steps and then there is general advice and the assumptions may not be your specific circumstances. So you can give me a call or talk to your own financial advisor about the strategy or you can make an appointment with me through my online calendar. And we can meet online or in person look any give me a call if you’ve got any questions or is anything if there’s anything I can help you with.

Thank you

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