TRANSITION TO RETIREMENT (TTR) - AS A SUPER BOOSTER
The Super Booster lets you save more super without having to reduce your take-home pay. Sounds too good to be true, right?
With this option, you continue to work full time, make salary sacrifice contributions to your super and top up your reduced take-home pay with income from a Transition to Retirement pension account (such as iQ Retirement™).
Your salary sacrifice super contributions are taxed at 15% instead of your individual income tax rate. In most instances a retirement account is taxed more favourably than salary and wages. This means you could potentially contribute more to super than you withdraw, without changing your take-home pay.
It’s a great option if you haven’t been in the superannuation system for a long time and have a retirement savings gap to close in the last years of work.
BENEFITS OF THE SUPER BOOSTER
- Take-home pay remains the same
- Increase your super balance
- Save on tax.
How Steve saved over $3,000 in tax and added this to his super savings
Steve, 60, is still working full time, earning $70,000 plus his super guarantee contribution, and plans to retire when he is 65. With five years up his sleeve he wants to bolster his retirement savings. While he will be limited by his concessional contributions cap of $25,000 for 2017/18, he opens an iQ Retirement account so he can start a Transition to Retirement strategy and salary sacrifice more into his super.
Steve salary sacrifices as much of his salary as possible, into his existing super account, and draws down an amount from his retirement account, so that he still has the same amount of money on which to live. The maximum he may draw down is 10% of his pension account.
Over the 2017/18 financial year Steve can save over $3,000 in tax and contribute this to his superannuation by putting it straight into his iQ Retirement account. This strategy is tax effective, because income payments from a pension account are tax free for people aged 60 and over (investments earnings on the assets will still be subject to the same maximum 15% tax rate that applies to super accumulation funds).
|INCOME POSITION||Current situation||With a TTR|
|Less salary sacrifice||$0||$(18,350)|
|Less tax payable^||($15,697)||($9,141)|
|Add (tax free) pension payment||$0||$11,794|
|TAKE HOME PAY||$54,303||$54,303|
|SUPER POSITION||Current situation||With a TTR|
|Less contributions tax||($998)||($3,750)|
|Less pension payment||$0||($11,794)|