Andy is 60 and earns $80,000 a year. He’s used the Retirement Income Calculator, and is interested in growing his super balance as much as he can before he retires in five years.
After speaking with a financial adviser, Andy decides to:
- Transfer most of his super into a new Income account. This saves money because he no longer pays tax on his investment earnings
- Salary-sacrifice a larger amount into super. This reduces his income tax and his take-home pay.
- Top up his salary by withdrawing between 4% and 10% of his Income account balance each year. Because Andy is over 60, there’s no tax payable on income payments from his Income account.
By using a TTR strategy to increase his salary sacrifice into super, Andy’s able to significantly increase his benefit at retirement without decreasing his take-home pay1.
||Before TTR strategy
||After TTR strategy
|Salary sacrifice into super
|Take home pay
|Total super contributions (net of tax)
|Super balance at the end of 5 years
1. The same employer superannuation contributions for Andy's current situation and for his TTR strategy.
2. Investment returns based on earning of 6.5% and an average tax rate of 15% on super fund earnings. Just remember though that past performance is not a reliable indicator of future performance.
3. As Andy is over 60 at 30 June 2015, his maximum concessional super contribution is $35,000 for 2014/2015.
4. Andy's concessional contributions are taxed at 15% when they are received by his super fund.
5. Andy's investment returns in his Income account are tax free.
6. The amount of TTR pension that can be withdrawn each year by Andy must be between the minimum 4% and maximum 10% of the account balance.
7. The lower income tax offset has been applied to income tax payable.
8. A 4% annual salary increase has been applied.
9. Tax payable on personal income is based on tax rates for 2014/2015.
There is a limit to the amount you can tax-effectively contribute to super. Read more about concessional contributions limits.