Or if you talk to people who don’t use acronyms for everything a Transition to Retirement (TTR / TRIS) pension?
If you haven’t and you are close to 60, or over, these are amazing for 2 reasons!
Firstly, these pensions allow you to draw money out of your superannuation, as tax-free pension payments, to offset your income. Allowing you to lower your working hours.
You can receive a payment fortnightly/monthly/bi-annually/annually (depending on the pension fund you pick) to allow you to comfortably offset your reduced income.
This is the scenario that gives the Transition to Retirement its name.
The second option, is the most common, as most people aren’t quite ready to start slowing down at 60.
You can still withdraw a pension payment, without reducing hours, which can then be recontributed back to superannuation as a concessional contribution. A concessional contribution allows you to claim it as a tax offset.
You receive your pension payment tax-free, recontribute it to superannuation which pays 15% contribution tax, and then claim a tax deduction on your individual tax rate.
The most common individual tax rate is 34.5% (including Medicare levy), meaning you’d be earning $45,001 to $120,000 per year.
If you were then to withdraw $20,000 from your pension and make a concessional contribution to superannuation you’d get $6,900 back when you do your tax return. Your superannuation would pay a $3,000 contribution tax.
This means you’d increase your wealth by $3,900.
This can be very complicated to do yourself as there are many different things to consider like you will need to set up pension accounts, minimum and maximum withdrawal limits, you have contribution caps on your superannuation, you can use the concessional catch-up payments, etc.
We are well-versed in this practice and are more than happy to assist!
For any Financial Services assistance, please speak to a Financial Planner now at BW Private Wealth Financial Planning | Ballarat | Ararat | Surrounds
