How much tax do you pay in super, transition to retirement and pension?
Financial Planner Luke Smith joined 2CC Talking Canberra 1206AM in The Money Show which aired on Friday 9 April 2021. This week’s topic: How much tax do you pay in super? And when you retire, how much tax will you pay in the pension phase of super? There’s a lot of confusion about tax and super.
Certainly no one wants to pay more tax than they need to on their retirement savings, and seeking financial planning advice is a great way to ensure you understand your situation and options, before you make important financial decisions. This is the first show after the Easter break and we hope you had the chance to enjoy some time away from work or perhaps even take a short break like Leon did.
Key highlights include:
Two key questions:
(1) Where are you in your super journey?
(2) Are you in accumulation fund or a defined benefit fund?
If you are:
- Of working age you will be in the accumulation phase, you will generally be paying 15% tax.
- Over 60 and retired, and taking a pension, you will pay 0% tax on your pension payments, provided that you’re below the transfer balance cap (1.6 million dollars at the time of recording).
- In a transition to retirement pension, but are still working, your earnings will be taxed at 15% inside the fund, but you will pay 0% tax on the money you take out as pension payments.
- Defined benefit schemes like CSS and PSS pensions however are taxed differently from the above accumulation super funds. It’s really important you understand the rules before you make decisions.
- Do you really have to be over 60 to withdraw money from super tax free?
- What determines the taxable and non-taxable components of your super?
- It’s also important to note what happens if you pass, the taxable component will be taxed at 17% if it passes to adult children.
- Luke offers his tips to manage your super and tax in the lead up to June 30
- Everyone has different goals and financial planning advice can help you achieve them more effectively, especially when you link different strategies.
Do you need advice around super, pensions and tax?
Luke as a Financial Planner can help you set up a financial planning strategy to help you achieve your personal financial goals. Superannuation and retirement can be complicated but the good news is you can make an appointment to speak with Luke about your specific cover requirements and options.
Make an appointment to confidentially discuss your own insurance, investment, super or retirement goals. Call Envision Financial Services on 6260 4749. You can also use our contact us form to make an appointment for a confidential discussion about your situation.
Luke will return to talk about financial planning on 2CC next Friday fortnight. You can also catch up with The Strategy Stacker – Luke Talks Money podcast. We look forward to your company again.
