Start retirement planning as early as possible

The new superannuation rules have given greater impetus to have a retirement plan in place much sooner than previously suggested, a specialist SMSF adviser has warned.

“New limitations on contributions to super will mean you must be actively making additional contributions sooner,” the SMSF Coach financial planner and SMSF Specialist Advisor Liam Shorte said in his latest online post covering retirement planning tips for the present year and onwards.

“Then when you have been working hard to get money into the super environment, and have complied with all the rules and contribution caps, you want to ensure you are maximising your opportunities when you start to draw on your super savings for a retirement income stream.”

Despite considerable speculation, the government did not remove the ability to commence and run transition-to-retirement income streams (TRIS), which are available once preservation age is reached, however the new super changes introduce a reduction of the concessions available for these income streams.

“From 1 July, instead of earnings on assets supporting these income streams being exempt from tax within the super environment, as would apply to all other income streams within the new $1.6 million threshold, earnings will instead remain subject to the standard 15 per cent tax rate that applies to funds in accumulation phase,” Shorte explained.

“So for those accessing their super via a TRIS so they can salary sacrifice more of their wages back to super within the new $25,000 limit from 1 July, this is still a very valid strategy.

“However, if you have the savings and can manage without accessing your super balance then it may be better to move your fund to accumulation phase.”

Finally, Shorte said SMSF trustees should look for opportunities to change from a TRIS to a full account-based pension where applicable.

“If you retire before 60 or leave any one employer after age 60 then you can switch your TRIS to a full tax-free pension,” he said.

“So think about your situation – if you can document a work arrangement and it genuinely ceases then you can meet that further condition of release, which could move your fund into the tax-free earnings phase again.”

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