Liam Shorte

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All posts in category Estate Planning

Can My Adult Child Receive My Superannuation Tax Free?

I would point out firstly that this question is around the taxable portion of any death benefit which includes any insurance benefit via super . The Tax free component will always pass tax-free to any beneficiary or your estate.

So when it comes to that taxable component which includes:

Super Guarantee Payments,
Salary Sacrifice,
Personal concessional contributions by self-employed and
Insurance claim benefits on policies held through super;

The answer is maybe depending on their circumstances and the records of financial support and trail of paper evidence you can show over a prolonged period.

Some worth keeping?

In most circumstances once your adult children have their own job or have left home they no longer qualify as a “financial dependent” for superannuation death benefits. However there has been ambiguity about when the line between self-reliance and financial dependency is crossed.

The ATO released a determination – see below SMSFD 2014/6 on who is a financial dependant for superannuation tax purposes? The question was important as any death benefit payment to the dependant child over the age of 18 would be tax-free if they were seen as a financial dependant. However other factors particular to this case and some previous Private Binding Rulings from the ATO may mean we have to be careful about relying on this determination. Also on the back of this latest ATO determination the question has been raised as to whether this determination may be used to help pass funds to grandchildren.

The facts of ATO ID 2014/6 released on 12th February 2014 are as follows:

The taxpayer in this case received a death benefit from the parent’s superannuation fund after the parent’s death. The taxpayer was over 18 years old at the time and receiving Youth Allowance payments from Centrelink but was still living at home with his parent until the parent’s death and receiving the lower “living at parental home” Youth Allowance payments from Centrelink.

What was the Issue?

Is a taxpayer in receipt of Youth Allowance at the time of the death of a parent, a death benefits dependant of the parent for the purpose of section 302-195 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Decision
Yes. On the facts given, the taxpayer is a death benefits dependant of the parent for the purpose of section 302-195 of the ITAA 1997.

Reasons given by the ATO for their decision

The term ‘death benefits dependant’ is defined in subsection 302-195(1) of the ITAA 1997. Paragraph 302-195(1)(d) states that a death benefits dependant, of a person who has died, is any other person who was a dependant of the deceased person just before he or she died.

Dictionary definitions of ‘dependant’ make reference to substantial financial support. That dependency involves substantial financial support or maintenance is supported by passages in the Explanatory Memorandum to the Income Tax Assessment Amendment Bill (No.3) 1984 and Explanatory Memorandum for Taxation Laws Amendment Bill (No. 5) 1987.

The determination of financial support is a question of fact. The Youth Allowance payments the taxpayer received were calculated at a lower ‘at home’ rate as opposed to the higher ‘independent’ rate. This indicates that the taxpayer was substantially financially dependent. A comparison of the level of financial support provided by the taxpayer’s parent with that provided by the Youth Allowance payments also indicates that the taxpayer was financially dependent.

So what strategies does it make us revisit:

As well as looking to improve the result for of children in need of support in their 20’s and possibly 30’s an ongoing strategy that some advisers have used and others have discounted is to set in place a strategy to show a grandchild can be financially dependent upon a grandparent. The strategy usually created that financial dependency through payment of school fees or special medical treatment to address disabilities, all designed to fund and enhance the grandchild’s basic standard of living not as just an improvement of their quality of life through gifts, holidays and luxuries.

So does this new determination change the status quo? This where I rely on the legal profession to step in and show some guidance so you should read the following from DBA Lawyers – Bryce Figot, one of my favourite presenters and a mine of information on all things SMSF.

ATO ID 2014/6 and the latest on financial dependency … including grandchildren

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

This information has been prepared without taking account of your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation and needs. This website provides an overview or summary only and it should not be considered a comprehensive statement on any matter or relied upon as such.

1 Comment

by SMSF Coach - Liam Shorte on March 13, 2014 • Permalink

Posted in Estate Planning

Posted by SMSF Coach - Liam Shorte on March 13, 2014

https://smsfcoach.com.au/2014/03/13/can-my-adult-child-receive-my-super-tax-free/

SMSFs and Estate Planning: When the documentation does not match

Western Australian has a habit of bringing to light interesting estate issues and one of the2013 cases lives up to that reputation and highlights the importance of really understanding estate planning where a self-managed superannuation fund is involved (Ioppolo & Hesford v Conti [2013] WASC 389).

The background to the case is that a Mrs Conti passed away with large balance in an SMSF, of which her husband was the surviving individual trustee and the only other member.

In the decade before her death Mrs Conti had signed a series of non-binding and binding death benefit nominations (BDBN) directing that her superannuation death benefit should be paid to her husband but these had lapsed. Note, many deeds still unnecessarily refer to the SIS regulations and in specific the need to renew BDBN every 3 years when dealing with Binding Nominations.

However in her Will, Mrs Conti had directed that her SMSF member balance be paid not to her husband but to her children and she specifically expressed her wish that none of her benefit should be paid to her spouse.

Mr Conti, (as the sole surviving trustee of the SMSF) resolved to pay her entire balance to himself. (This would have needed to be done within 6 months of her death under Section 17A(4) of the SIS Act or else a second trustee would have to be appointed).

It is worth reminding you that the Superannuation Complaints Tribunal (SCT) has no authority to review an SMSF trustee decision.

As such, Mrs Conti’s children who were the executors under her Will had to challenge this trustee decision in the Supreme Court of Western Australia.

The Court held that the trustee of the SMSF could pay the death benefit to Mr Conti, and the children failed in their application.

This reinforces the need to consider an overview of the entire estate and other assets like trusts, companies and superannuation to ensure the various documentation required in succession planning is supportive of the clients wishes. Estate planning must consider the full circumstances and specific tailored solutions, especially where there is superannuation and in particular where a SMSF is included.

Some finer points worth noting on this case are that the will which expressed the intention to leave the funds to the children was made in 2005, however she also made a later binding nomination in 2006 where she (again) directed the payment to her husband. So you can see that there was some confusion as to actual wishes. The later nomination lapsed, so at death, there was no binding nomination in force and two conflicting expressions of her wishes (ie the will in 2005 went one way and the BDN in 2006 which went the other).

The central point of the article remains the same, but I don’t think we can be sure what the wife’s actual wishes intentions were at the date of death, given the conflicting and confusing messages she left behind.

The use of a Corporate Trustees, updating the Trust deed to allow for a Non-Lapsing Binding Death Benefit Nomination are some of the measures that may have prevented this outcome.

We can work with you and your solicitor or introduce you to a solicitor with specialist SMSF training to minimise the chances of such problems occurring.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

Using an Anti-Detriment Payment vs. Recontribution Strategy in your SMSF

I have used the anti-detriment payment strategy to improve death benefit payments over the years but they are dwarfed by the number of SMSFs using recontribution strategies.

No clear winner

With the implementation of the Simple Super legislation in July 2007, many strategies have been published regarding re-contributing into your superannuation fund with the benefit of avoiding the 17% tax on death benefits to non-dependants. However this may not always be beneficial as paying no tax may result in no anti-detriment payment being received which is an additional / alternative strategy available.

The recontribution strategy involves a member of a superannuation fund, normally after age 60 or if fully retired after age 55, withdrawing a lump-sum, and then recontributing the amount back into the fund as a non-concessional contribution. The result of this process increases a member’s tax free component of their benefit and reduces the taxable portion.

The advantages of this include:

Members under age 60 become eligible for an increased tax-free portion on their pension;
Non-tax dependent beneficiaries of a deceased member’s account pay no tax on the tax-free portion but 16.5% on the balance.

There are also considerations that must be taken into account before implementing such a strategy, such as:

by withdrawing lump sum benefits from super below the age of 60, you will only be able to receive the first $185,000 of your taxable portion at a concessional tax rate;
Your ability to recontribute is restricted. For the current financial year, you may contribute up to an annual cap of $180,000. For members under 65, they may contribute up to $540,000 in a financial year by using the “3 year bring forward” rule.

An anti-detriment payment is effectively a refund of contributions tax paid by a member during the accumulation phase. It is an additional payment that may be made to an eligible dependant if a death benefit is taken as a lump sum. The anti-detriment payment is calculated based on the taxable portion of a deceased members balance so a reduction in the taxable component through a recontribution strategy will effectively reduce any anti-detriment payment available. The effect of either strategy can be seen below.

Consider the following example:

Member with $600,000 in their account all from SG Contributions and Salary Sacrifice i.e. no Tax Free component – 100% Taxable Component. He has a son and daughter who each earn about $90,000 per annum.

In this case not only has the deceased member’s dependant received an additional $105,882, the relevant Fund will be able to apply $705,880 in deductions against its income going forward. Where, for example, the deceased’s adult son and daughter choose to become members of the SMSF and, on average, the SMSF earns $40,000 a year in investment income, a deduction of this size could shield the Fund from tax (on concessional contributions and investment income) for over 8 years!

Anti-Detriment		Without Anti-Detriment
Tax Free Component	Nil	Tax Free Component	Nil
Lump sum death benefit	$600,000	Lump sum death benefit	$600,000
Anti-detriment payment	$105,882	Anti-detriment payment	Nil
Total death benefit	$705,880	Total death benefit	$600,000
Tax deductions going forward ($105,882/15%)	$705,880	Tax deductions going forward	Nil

The following table looks at the effect of implementing a re-contribution strategy on death benefits paid to a non-dependant for tax purposes (such as adult children) and a dependant (spouse) compared to an anti-detriment payment is as follows:

Strategy 1: No Recontribution Strategy (lump sum paid to adult child)

Strategy 2: No Recontribution Strategy (lump sum paid to spouse)

Strategy 3 Full Recontribution Strategy used

	Strategy 1	Strategy 2	Strategy 3
Taxable Component	$600,000	$600,000	Nil
Tax-free component	Nil	Nil	$600,000
Anti-detriment payment	$105,882	$105,882
Total benefit (pre-tax)	$705,882	$705,882	$600,000
Tax payable by non-dependant	$116,471	Nil	Nil
Total benefit (after-tax)	$589,411	$705,882	$600,000

Generally, the recontribution strategy is worth considering if the benefit is likely to be paid to a non-dependent for tax purposes, such as an adult child unless they will make use of the SMSF for their own future superannuation strategy. This is because the tax savings generally outweigh any potential anti-detriment payment they would otherwise receive.

For a spouse or dependant child, you will usually be better off relying on the anti-detriment provisions – because they pay no tax on death benefits. However this requires prior planning and willingness to pay additional administration costs and taxes on anti-detriment reserve even when you reach pension age.

Where the anti-detriment payment tax deduction causes a tax loss in the fund, the full quantum of the loss may not give a benefit to remaining members. In circumstances where for example the spouse is in pension phase, it is important to recognise that “Exempt Current Pension Income” absorbs carry forward losses (other than carry forward capital losses) before it is available to offset income of the Fund. Also, an anti-detriment reserve can affect the calculation of exempt pension income in the fund. Therefore, the full benefit of the anti-detriment may not be able to be utilized.

An alternative solution for those looking to use an Anti-detriment strategy and with a terminal illness or shorter expected life expectancy is to roll-over the member’s account to a retail or industry superannuation account provider that have a policy of making anti-detriment payments as their set up means they will have more flexibility to fund anti-detriment payments.

Another alternative for those dealing with a death of someone well before retirement age is the use of a Future Service Benefits Deduction so click on the link to read more about that.

If you believe that setting up a recontribution and/or an anti-detriment strategy could be beneficial to your superannuation fund and to the your beneficiaries, then now is the time to plan for this and put in place the appropriate structures and strategies. Contact me at our Windsor or Castle Hill offices or by phone or email if you would like to discuss your options.

Keep updated by putting an email address in on the left hand column and pressing the “Sign me up!” button. Happy to take comments or questions in the section below.

Bye for now.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

2 Comments

by SMSF Coach - Liam Shorte on August 5, 2013 • Permalink

Posted in Anti-Detriment, Estate Planning

Posted by SMSF Coach - Liam Shorte on August 5, 2013

https://smsfcoach.com.au/2013/08/05/using-an-anti-detriment-payment-vs-recontribution-strategy-in-your-smsf/

ATO backs off on SMSF property crunch | | MacroBusiness

In November 2011, a draft tax ruling (TR2011/D3) by the ATO caused concern among Self Managed Superannuation Fund trustees and property investors in particular. The ruling suggested that the pension tax exemption …

See the full article on www.macrobusiness.com.au

Superannuation — tax certainty for deceased estates – Government MYEFO announcement good for SMSFs

The release of draft taxation ruling TR 2011/D3 in July last year caused much concern when it suggested that the pension exemption ceases automatically upon death (unless a reversionary pension was in place).

Under those proposed rules if an SMSF member died with assets carrying unrealised Capital Gains, even if the deceased were receiving a pension, upon death the pension would cease (unless the pension qualified as an auto-reversionary pension). If SMSF assets were then sold/transferred, the SMSF would have CGT implications. (more…)

2 Comments

by SMSF Coach - Liam Shorte on October 22, 2012 • Permalink

Posted in Binding Death Nominations, Estate Planning, News & Stats, Pensions, Reversionary Pension, SMSF

Posted by SMSF Coach - Liam Shorte on October 22, 2012

https://smsfcoach.com.au/2012/10/22/superannuation-tax-certainty-for-deceased-estates-government-myefo-announcement-good-for-smsfs/

Skeletons in the Cupboards and Tax Man at the Door – Estate Planning Solutions for SMSF members

Here is one solution to a big problem that may become more common with blended families and increased divorce as well as de facto arrangements.

Our client , lets call him , Scott (age 78) is a widower in the Hills district and he has a $652,000 account based pension (containing a 100% taxable component to keep it simple). His two adult daughters who are financially independent are noted as 50/50 beneficiaries on his non-lapsing binding death benefit nomination (see here for more details). Any lump sum death benefit they receive will be subject to 17 per cent tax. In dollar terms, this is $110,500 (calculation: $652,000 x 17%) and he wasn’t too happy about this.

Scott was advised by his specialist he has 2-3 years maximum to live due to an aggressive cancer. He threw this curly one at me to come up with a strategy as he wants to maximise his estate for his kids but also retain access to the funds while alive to fund medical and living expenses. Our strategy involves Scott taking a tax-free withdrawal from his account based pension. He then let me know about some skeletons he had in his cupboard!

Scott could retain these funds within a bank account, however the account will form part of his estate upon his death. Even though his estate will be paid predominately to his adult daughters, he is concerned about his estranged son from an affair he had in his late 50’s who might challenge the Will.

We advised that a valid alternative available to Scott is to invest into an investment bond with himself as the owner and the life insured. Since an investment bond is a non-estate asset, upon his death the funds will be paid tax-free to his adult daughters.

Both strategies will avoid the $110,500 of death benefits tax on funds paid to his daughters, however only the investment bond will ensure the funds do not become part of his estate. Scott’s two daughters need only produce a copy of his death certificate to gain access to the funds within the bond. This could also avoid lengthy delays with the administration of the estate and overcome possible estate challenges from his estranged son.

In terms of costs we were looking at foregoing the tax-free status in pension phase for the 2 years but that was far outweighed by the savings in the death benefits tax and we are actually able to wind up the SMSF to save his children the hassle of dealing with that later.

For further information on the issues raised in this blog please contact our Castle Hill SMSF Centre or Windsor Financial Planning Office or choose an appointment option here

I hope this guidance has been helpful and please take the time to comment. Feedback always appreciated. Please reblog, retweet, put on your Facebook page if you found information helpful.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Select Pty Ltd ABN 41 621 447 345, AFSL 51572

2 Comments

by SMSF Coach - Liam Shorte on September 8, 2012 • Permalink

Posted in Anti-Detriment, Binding Death Nominations, Estate Planning, Life Insurance, Reversionary Pension, SMSF, Tax Planning

Tagged Baulkham Hills, Castle Hill, Corporate, Death, DIY Super, Dural, Individual Trustee, Insurance Bonds, Pensions, Self MAnaged Super, SMSF, Strategy, superannuation, Tax Planning, Transition, TRAP, TRIS, Trustee, Windsor

Posted by SMSF Coach - Liam Shorte on September 8, 2012

https://smsfcoach.com.au/2012/09/08/skeletons-in-the-cupboards-and-tax-man-at-the-door-estate-planning-solutions-for-smsf-members/

Do you want a say in who gets your superannuation if you die? Then put some strategies in place now.

You may have ignored your Super up to now as you feel young , immortal or just don’t like thinking about death (see I said “if you die” not “when you die”” just so you would continue reading). But in doing so you may not have left your superannuation to the person you intended.

Strict rules govern how your super is distributed when you die – and it’s important to follow those rules to make sure your money goes to whom you want instead of having a faceless Super Fund Trustee or worse an out of date Trust Deed decide.

One of the most important decisions you make when you join a super fund has nothing at all to do with investment. It revolves around the question of whom to nominate as the beneficiaries of your super when you die.

It is a critical decision – because if you don’t get it right your savings could be given to someone other than your preferred beneficiaries or the funds could be held up while disputes are mediated.

Few exceptions

When a fund member dies, subject to the trust deed, his or her superannuation may only be paid to:

The member’s spouse (including a de facto spouse, whether same-sex or not)
The member’s children
A person who was financially dependant on the deceased member at the date of death
A person with whom the deceased member had an interdependency relationship at the date of death
The member’s legal personal representative (estate)
NOTE that none of the above automatically include Mother, Father, Brothers or Sisters.

An interdependency relationship is defined as one between two persons (whether or not related by family) where it is very clear that:

They have a close personal relationship; and
They live together; and
One or each of them provides the other with financial support; and
One or each of them provides the other with domestic support and personal care.

For the purposes of that definition, all of the circumstances of the relationship between the persons must be taken into account, including (where relevant):

the duration of the relationship; and
whether or not a sexual relationship exists; and
the ownership, use and acquisition of property; and
the degree of mutual commitment to a shared life; and
the care and support of children; and
the reputation and public aspects of the relationship; and
the degree of emotional support; and
the extent to which the relationship is one of mere convenience; and
any evidence suggesting that the parties intend the relationship to be permanent;

A determination can take into account a statutory declaration signed by one of the persons to the effect that the person is, or (in the case of a statutory declaration made after the end of the relationship) was, in an interdependency relationship with the other person

In the case of a Retail or many Industry fund the beneficiaries you nominate when you join a fund are normally only a guide – the trustees of your fund will have the ultimate discretion as to who will receive your super. They will take into consideration any nomination of beneficiaries that you have made, but are not bound by your request.

The only exception is where your super fund allows you to make a “Binding Death Benefit Nomination” or even better a ” Non-Lapsing Binding Death Benefit Nomination” . This is a nomination that the trustees are obliged to follow. You may only nominate a spouse, child, someone who you held an interdependency relationship with, or a financial dependant.

If you want your superannuation to pass to someone else, such as a friend or charity, you should consider nominating your estate as the preferred beneficiary of your superannuation entitlements. You superannuation will then be distributed according to the terms of your will – you would need to nominate such people or bodies as beneficiaries of your will.

Regular review

It is important to review death benefit nominations regularly and to include full details of your beneficiaries – including their relationship to you, their full name and their address. This applies even if you have used a Non-Lapsing BDBN as your circusmtances may have changed,

Keeping your super fund trustee informed of any changes to your beneficiaries – or changes to their personal details – will make the task of distributing your super much less complex for all involved.

It’s also worth noting that the basic binding death benefit nominations are only valid for three years – so make sure you update your nomination regularly or ask for a Non-lapsing Binding Death Nomination form.

To be valid, a binding death benefit nomination must be:

Made to the trustee in writing, clearly setting out the proportion of benefits to be paid to respective beneficiaries;
Be signed by the member in the presence of two witnesses over 18 years of age and who are not themselves named as beneficiaries;
Include a signed witness declaration;
Received by the trustee; and
Renewed every three years, although it is possible and in my opinion preferred to have a non-lapsing binding death benefit nomination.

Who to leave your superannuation to (and how) can be a complex question that can involve tax, social security and other financial considerations. You are well advised to seek professional assistance from a financial planner in this area and if dealing with an SMSF then a SMSF Specialist Advisor™ is the best place to start.

Are you looking for an advisor that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options.

Liam Shorte B.Bus SSA™ AFP

Financial Planner & SMSF Specialist Advisor™

Tel: 02　98941844, Mobile: 0413 936 299

PO Box 6002 BHBC, Baulkham Hills NSW 2153

5/15 Terminus St. Castle Hill NSW 2154

Corporate Authorised Representative of Viridian Advisory Pty Ltd (ABN 34 605 438 042) (AFSL 476223)

2 Comments

by SMSF Coach - Liam Shorte on July 13, 2012 • Permalink

Posted in Binding Death Nominations, Estate Planning, Financial Planning, SMSF, Trustee

Tagged Binding Death Nominations, Death, Estate Planning, Nominations, seniors, SMSF, Strategy, superannuation, Tax Planning, Trustee, Wills

Posted by SMSF Coach - Liam Shorte on July 13, 2012

https://smsfcoach.com.au/2012/07/13/do-you-want-a-say-in-who-gets-your-superannuation-if-you-die-then-put-some-strategies-in-place-now/

Understanding transition to retirement pensions

If you have reached your preservation age you can use a transition to retirement pension to access your superannuation as a non-commutable income stream while you are still working. This may be particularly attractive if you have reduced your working hours and need to top-up your income to maintain your standard of living.

There was another great benefit of setting up the pension which was that all the funds supporting the pension move in to a tax exempt status. Yes that means those funds paid no earnings tax and in fact they received a full refund of any franking credits on your investments. For the average investor this can increase your returns by 0.5% to 1% a year risk free every year! However that tax free status was removed as of 1 July 2017.

The strategy still remains effective for those needing a boost in income or those who can combine the pension with salary sacrifice.

What is a transition to retirement pension?

Transition to retirement pensions allow you to access your superannuation as a non-commutable income stream, after reaching preservation age (see below), but while you are still working.

The aim of these income streams is to provide you with flexibility in the lead up to retirement. For example, you may choose to reduce your working hours and at the same time access your superannuation as a transition to retirement pension that can supplement your other income. It may also allow you to salary sacrifice to give your retirement savings a boost.

Not all superannuation funds offer the transition to retirement pensions, so you need to check with your own fund to see if they do. You can also start one in a self-managed superannuation fund.

Are there any special characteristics?

These pensions are essentially like a normal account-based pension, but with two important differences.

Firstly, they are non-commutable, which means they cannot be converted into a lump sum until you satisfy a condition of release, such as retirement or age 65.

Secondly, you have a minimum pension amount you must withdraw each year but you can only withdraw up to 10% of the account balance (at 1 July). No lump sum withdrawals are allowed.

What is my preservation age?

Your preservation age is generally the date from which you can access your superannuation benefits and depends upon your date of birth.

Date of birth	Preservation Age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
After 30 June 1964	60

How are transition to retirement pensions taxed?

Transition to retirement pensions are taxed the same as regular superannuation income streams.

If you are under age 60, the taxable part of your pension will be taxed at your marginal rate, but you receive a 15% tax offset if your pension is paid from a taxed source*.

However, once you reach 60, your pension is tax-free if paid from a taxed source*.

Most people belong to a taxed superannuation fund. Some government superannuation funds may be untaxed and you will pay higher tax on pensions.

Can you still contribute to superannuation?

As long as you are eligible to contribute, you and your employer can still contribute to superannuation for your benefit. In any case, your employer’s usual superannuation guarantee obligations would still apply. You need to have an accumulation account to pay these amounts into.

Is a transition to retirement pension right for you?

Transition to retirement pensions can provide you with flexibility in the years leading up to your retirement and can help to boost your retirement savings in some circumstances.

People who might find the transition to retirement pensions attractive include those who:

have reduced working hours from full-time to part-time, eg down to three days per week. The reduced salary can be topped up with income from the transition to retirement pension
are able to salary sacrifice to your superannuation or your spouse’s super for tax savings – the outcome of combining the transition to retirement pension with salary sacrifice can be a greater build-up of superannuation savings by the time you reach actual retirement

The transition to retirement rules and associated strategies can be very complicated. It is recommended that you seek expert advice from your financial adviser before deciding if this type of income stream and strategy is right for you.

Want a Superannuation Review or are you just looking for an adviser that will keep you up to date and provide guidance and tips like in this blog? Then why now contact me at our Castle Hill or Windsor office in Northwest Sydney to arrange a one on one consultation. Just click the Schedule Now button up on the left to find the appointment options. Do it! make this year the year to get organised or it will be 2030 before you know it.

Please consider passing on this article to family or friends. Pay it forward!

Liam Shorte B.Bus FSSA™ AFP

Financial Planner & SMSF Specialist Advisor™

SMSF016_Fellow_Logo_CMYK

Tel: 02　9899 3693, Mobile: 0413 936 299

PO Box 6002 BHBC, NORWEST NSW 2153

40/8 Victoria Ave , CASTLE HILL NSW 2154

Suite 4/1 Dight St, Windsor NSW 2765

Corporate Authorised Representative of Viridian Advisory Pty Ltd (ABN 34 605 438 042) (AFSL 476223)

11 Comments

by SMSF Coach - Liam Shorte on March 14, 2012 • Permalink

Posted in Asset Allocation, Binding Death Nominations, Financial Planning, Franking Credits, Pensions, Reversionary Pension, SMSF, Superannuation, Tax Planning, Term Deposits, Trustee

Tagged Asset Allocation, DIY Super, International, Investing, Investment, Pensions, SMSF, Strategy, Tax Planning, Transition, TRAP, TRIS, Trustee

Posted by SMSF Coach - Liam Shorte on March 14, 2012

https://smsfcoach.com.au/2012/03/14/understanding-transition-to-retirement-pensions/

Future Service Benefits Deduction a more practical alternative to the Anti-Detriment tax deduction for SMSFs and another example of where SMSFs may lead to better outcomes.

I hit a real low when I hear a client is Permanently Disabled or Terminally ill and I am sure that is the same with most of you too but in our field of work it is a matter of when not if we have to deal with such a situation. My reaction is to always want to make the best of the situation from my point of view and add as much benefit and make life as good for that client as possible.

I have always looked at the anti-detriment deduction (no longer available for deaths after 30 June 2017) and wished there was something I could do for the client while living as well as helping their family afterwards. (more…)

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by SMSF Coach - Liam Shorte on June 22, 2011 • Permalink

Posted in Estate Planning, Insurance Strategies, SMSF Management, Tax Planning

Posted by SMSF Coach - Liam Shorte on June 22, 2011

https://smsfcoach.com.au/2011/06/22/future-service-benefits-deduction-a-more-practical-alternative-to-the-anti-detriment-tax-deduction-for-smsfs-and-another-example-of-where-smsfs-may-lead-to-better-outcomes/

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Here is one solution to a big problem that may become more common with blended families and increased divorce as well as de facto arrangements.

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