Transition to Retirement

In recent weeks I have been training to keep my accreditation current, during this I stumbled upon a little gem that may suit your situation.

It deals with retirement and Self Managed Superannuation Funds (SMSF). Once you arrive at the “preservation age” (currently 55 years, if you were born before 1960) you have the ability to look at the “Transition to Retirement” options.

Now a number of rules apply here, so its best to see a financial advisor to get information pertaining to your specific situation, but let me outline some of the options.

Although the transition to retirement rules were originally introduced to provide for people over the  preservation age to move into part time work, they can also be used to allow those people to continue in full time work and start to take advantage from your hard earned superannuation.

So what are the benefits? From 55 years, you may start to take a pension from your SMSF between 2% and 10% per year of the balance – but before you say anything let me continue.

Tax on your SMSF occurs at 15% until you start a retirement income stream (pension), from then on it is tax free. Im sure most of you have heard of Salary Sacrifice – basically your  employer pays money into your SMSF to give you added tax benefits with a current limit of $50,000 (if you are under  50 its only $25,000 p.a.), this comes from pre-tax income so the benefits are greater .

So lets look at some numbers considering things like Salary Sacrifice in the equation.



In the above table “Sally” takes a $41,000 salary sacrifice to be added into super and deduct $33,000 pension from the SMSF. Using the above figures, Net income is the same but the super fund grows at $7,000 p.a. faster – not a bad trade off.

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