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Can I afford to retire?

By Vicki Alateras, 01/06/2014

Do I have enough super to stop work?

The decision to retire permanently largely depends on whether you have the financial resources available to last the rest of your life (which could be over twenty years). Especially since you probably won't be able to access the age pension until you're 65 for men (for women it depends on when you were born). Working out how much super you need to retire can be complicated, that is why you should speak to one of our retirement advisers.

 

Claiming personal deductions

You might use this strategy if you sell an asset which triggers a capital gain. If you are eligible to make a personal tax deductible concessional contribution (eg you are self employed), you may be able to offset any assessable capital gains up to your concessional cap.

If you are under age 50 on the last day of the financial year your concessional cap is $30,000 pa (indexed). If you are 50 or over you are entitled to a $35,000 pa cap from July 1st, 2014.

 

Small business capital gains tax concessions

If you own a small business and plan to sell that business to fund your retirement, you may be able to minimise (or reduce this amount to zero) any capital gains tax on the sale of your business, if you contribute the proceeds into your super. This can be a complex strategy and we strongly recommend you seek professional advice from one of our expert financial advisers.

 

Transition to retirement - work part-time and acess your super at the same time

If you're aged between 55 and 65 a 'Transition to Retirement' allocated pension allows you to access your super while you're still working, full time or part time.

 

Two transition to retirement strategies to consider

1. Less work, same income - reduce your working hours and bolster your reduced salary with income generated from a 'Transition to Retirement' allocated pension.

2. More super, less tax - make salary sacrifice contributions to your super and bolster your reduced salary with income generated from a 'Transition to Retirement' allocated pension. It's something of a balancing act, not only will you need your employer's approval, you also need to be mindful of legislative changes, which is why we recommend you speak to one of our retirement specialist.

 

The tax effect of transition to retirement strategies

In most instances, you pay less tax on income generated from an allocated pension than you do on the same amount of salary, making transition to retirement strategies a tax-effective way to boost your super balance and / or cut back your hours.

  • Low tax rate - your salary sacrifice super contributions are taxed at 15 per cent instead of your individual income tax rate as long as all your concessional contributions fall within the current cap.
  • Tax concessions - aged 55 to 59, the taxable component of your transition to retirement allocated pension income is eligible for a 15 per cent tax offset.
  • Tax free income - if you're aged 60 or over, your transition to retirement allocated pension income is tax free.
  • Tax-free investment earnings - the assets backing a transition to retirement allocated pension generate tax-free investment earnings, which would otherwise have been taxed at up to 15 per cent.

 

Contact us for a free initial consultation with one of our expert advisers.