Retirement benefits from superannuation should be accessed in the most tax effective manner.
Consider Lyn’s case:
Lyn, aged 57, is retiring. Lyn requires $80,000 (pre-tax) per annum to maintain her lifestyle. Her current superannuation balance of $1,000,000 comprises 50% taxable component
and 50% tax free component.
Transitional Pension
Lyn may commence a transitional pension up until the age of 60 and withdraw the required $80,000 per annum. The taxable component of $40,000 would be taxed at her marginal tax rates with a 15% tax offset.
Lump Sum Withdrawal
Alternatively, Lyn may elect to withdraw $80,000 per year up until age of 60 as a lump sum. Lyn has a taxable lump sum low rate lifetime limit of $185,000. As 50% of Lyn’s balance is tax free, her taxable lifetime limit would reduce by $40,000 p.a.
The tax effective option for Lyn would be lump sum withdrawal as it is entirely tax free.*
If you have questions please contact Andrew Marshall or Janine Orpwood at Langley McKimmie Chartered Accountants on (03) 5427 8100 for an initial consultation.
We service clients in the Woodend and Macedon Ranges region within Victoria Australia.
*This is a taxation perspective only, financial advice should be sought prior to accessing
superannuation.
