Transition to Retirement (TTR)
Accessing superannuation is governed by various age-based provisions. Broadly speaking, superannuation cannot be accessed until a person reaches what the Government calls Preservation Age. Currently, for those born before 01/07/60, this is 55 years of age.
What is TTR?
In summary:
- Superannuation fund members who have attained Preservation Age have the opportunity to continue participating in the work force and adding to their super, while claiming some of it as a non-commutable super income stream. (Non-commutable means that you cannot take a lump sum payment from an income stream while you continue to work. You can, however, withdraw a lump sum when you retire).
- A 15% tax offset applies to the taxable component of a superannuation income stream drawn by someone over 55 years of age and under 60.
- People who have reached 60 years of age or over do not pay any tax on super income streams or lump sum benefits (unless they include a post-June 1983 untaxed component).
- Investment earnings on super income streams are not taxed at all.
Options & Potential Advantages for people who have attained or are over Preservation Age
There are number of options available to fund members who attain or are over Preservation Age. For example, you might continue to work and combine salary sacrificing into their super with a super income stream.
This can be done by:
- Using the Government’s TTR provisions to salary sacrifice a significant proportion of your wages or salary into superannuation to give it a rapid boost before you retire and, at the same time, draw an income stream to make up any loss of income.
- Establishing a superannuation income stream under the Government’s TTR provisions to make up income following a reduction in working hours, or on taking on a lower paid job with less pressure.
In the scenarios above, members benefit from the concessional taxation arrangements that apply to superannuation:
- The 15% Superannuation Contributions Tax is less than the income tax rate on earnings above $37,000 (2010/11). This means that by salary sacrificing into super you may increase the value of your income, reduce income tax and accrue more in super.
- The investment earnings on super income streams are not taxed.
- The maximum 15% tax payable on superannuation funds’ investment earnings is generally less than an individual’s marginal tax rate.
- People 60 years of age or over do not pay income tax on a super income stream.
- The income tax payable on a super income stream by people under 60 years of age receives special tax treatment (including a 15% offset).
As you approach key age milestones (ie. Age 55, 60, or 65), we encourage you to consult one of our Advisers who will be able to assist you with your particular circumstances.
