Once you have met a condition of release you can withdraw your superannuation as a lump sum or commence a superannuation pension. The tax implications of the various options available can vary dramatically. Planning your retirement income strategy effectively is critical and your Count Adviser is in a great position to help you with this.
Except in the case of an untaxed superannuation fund, a lump sum withdrawal from super after age 60 will be tax-free. If you withdraw a lump sum prior to this age tax may apply. You should always think carefully about the need to make lump sum withdrawals, as each one will reduce the super balance that you are relying on to fund your retirement.
A superannuation pension is just like a normal super fund, with the requirement that you take at least a minimum payment in each financial year. For 2010/11, the minimum payment is 50% of the standard amount, starting at 2% of your account balance when you are under 65, and gradually increases as you get older. In most cases, all pension payments will be tax-free after you reach age 60. If you are under 60, some tax may apply.
Transition to Retirement pension
Once you have reached your preservation age (currently 55) you are able to commence a Transition to Retirement pension, even if you don’t stop working. There are 3 main reasons why you might want to commence this type of pension:
- By salary sacrificing into superannuation you will reduce the assessable income that you earn. This means that you will save tax without necessarily losing your level of income in order to meet your lifestyle requirements.
- You can continue working while salary sacrificing a significant amount of your salary into superannuation and live off income from your Transition to Retirement pension (this strategy can provide a powerful increase in your superannuation balance by the time you retire). The main restriction on a Transition to Retirement pension is that a maximum payment of 10% of your account balance per financial year applies. You are also unable to make lump sum withdrawals. These restrictions generally apply until you retire or reach age 65.
- A transition to retirement pension allows you to reduce your working hours and supplement your income with pension payments from a Transition to Retirement pension.