Print PageTransition to retirement to boost your super
The transition to retirement strategy allows you to continue working full time while increasing your before-tax super contributions up to $50,000 and supplementing your income with a pre-retirement pension.
By changing how you receive your income, you can generally reduce your marginal tax rate to 15%. Typically, this option is of greatest benefit to people who are age 60 or over on a high marginal tax rate.
If you’re aged between 55 and 65 with at least $15,000 to invest, you can transition to retirement to boost your super for a comfortable retirement.
Pending changes:
From 1 July 2012 the government plans to reduce the amount of before-tax contributions people aged 50 and over can make to $25,000 unless their account balance is under $500,000. If your super balance is close to this amount you could consider splitting your before-tax contributions with your spouse to remain under the threshold.
Doing the maths - Contribute more to super and maintain the same income
Fred is 60 years old and earns $100,000 a year. He pays $26,450 in income tax for 2011-12, including the Medicare Levy (but excluding the 2011-12 flood levy), leaving him with $73,550.
Fred decides to salary sacrifice $40,000 a year to super, reducing his taxable income to $60,000. Now he only pays $12,450 in income tax. At the same time, Fred takes out a pre-retirement pension and draws $26,000 from his pension to maintain his lifestyle.
As Fred is over age 60 his pension payments are tax free. Although his before-tax contributions are taxed at 15%, he’s still contributing $34,000 to grow his super.
This means Fred is adding an extra $8,000 to his super each year and still taking home the same income.
Find out more in our transitioning to retirement fact sheet.
How to transition to retirement
Step 1. Learn about transitioning to retirement and check if it's right for you. Read our transition to retirement fact sheet or consider getting financial advice about retirement from AUSCOAL Advice.
Step 2. Apply for a pre-retirement pension.
Step 3. Ask your employer to increase your before-tax super contributions.
If you're short of your super saving goal, find out what other people are doing to catch up.
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