PEOPLE who are at the business end of their careers now have to wait longer before accessing the superannuation nest egg, as the preservation age steadily increases to 60 over the coming years.
New laws in effect from July 2015 mean that the current minimum age a member can access their super benefits has increased to 56, with this preservation age limit continuing to rise gradually until it reaches 60 for everyone born on or after July 1, 1964.
However, this change doesn't necessarily spell further gruelling years on the job for the weary worker.
Even if a person has no intention of retiring until they are in their 60s, the change has major implications for anyone considering tapping into their super beforehand, using a transition-to-retirement (TTR) income stream.
Introduced in 2005 as part of a government strategy to encourage delayed retirement, if Australians are aged between preservation age and 65 and still working, they may have an opportunity to access their TTR kitty to ease into life after work.
If a person is in their late 50s and wants to reduce their working hours without being left financially destitute, a TTR pension can help supplement a wage.
If that same person continues to work into their sixties, they can enjoy that pension at a tax-free rate.
By combining a TTR pension with other superannuation strategies including salary sacrifice they can even reduce personal income tax, withdrawing from the pension and boosting super balance at the same time.
While the tax treatment of a TTR pension can be an alluring option for many pre-retirees, the rules can be complex when it comes to lump-sum withdrawal and other similar actions.
The Tax Office also warns that SMSF trustees need to be particularly diligent with their payments in light of the new preservation age, making sure to avoid paying those who aren't eligible under the scheme.
For more information on early retirement or the TTR pension contact John O'Brien at Visis Private Wealth on [email protected] or 07 3231 4004.
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