Earn $164,000 without breaking a sweat!

Are you 55 or over? If you are, stop what you are doing and read this article!

For all those under 55, please forward this to your 55 and over gang and please make sure they read this article!

Don’t just read this article – act on it! It’s one of those rare opportunities in life where it is possible to earn some extra cash – with no catches!

The powers in Canberra have strongly indicated that they will be looking to alter the superannuation and pension rules to generate more tax revenue. This probably comes as no surprise as the resources boom ends, Canberra is looking to other areas of the economy to carry the load.

However, there is one strategy that can boost your super, save you thousands in tax, requires little effort and is risk-free.

Naturally the government will look to abolish (or severely cut back) in the latest round of superannuation ‘reforms’ (tax grabs). However, the Government will usually ‘grandfather’ anyone who is wise enough to put the strategy in place before it’s axed…. sorry “reformed”. (Grandfathering: allowing you to continue what you were doing, because you’re already doing it.)

But you need to act quickly.

We are talking about putting in place a ‘transition to retirement strategy’ or a ‘TTR.

Let me explain how it works:

When you reach your 'preservation age', you are allowed to access your superannuation. Your ‘preservation age’ is the age at which the Government will let you get your hands on your super balance. If you were born before 1 July 1960 (i.e. aged 55 or over), you qualify.

In essence, you salary sacrifice into super (before-tax contributions), then replace the sacrificed income with low-taxed payments if you are under 60. If you are over 60 it is a tax-free pension payment!

A TTR strategy allows you to:

  • withdraw money out of your super without having to retire
  • maintain the same income
  • pay less tax (always a good thing)
  • increase your super balance at the same time
  • completely risk-free and government approved

Let me share Liz’s story of how she increased her super payout by $164,000!

When Liz came to see me at Paris Financial, she was 57 and wanting to increase her super over the next 10 years of her working life before she retires. Liz had heard of the TTR strategy but did not know if she qualified for it or even if it could help her.

She earns $124,000 a year and has $236,000 in super, invested in a balanced option.

Liz’s employer pays the standard 9.5 per cent of her wage into her super fund ($12,000) – this is well under her before-tax cap of $35,000 ($30,000 for people under 49).

Because the Government caps super contributions, super contributions are taxed at 15 cents in the dollar compared to Liz’s wages which are taxed at 37 cents in the dollar – that’s 22 cents in the dollar difference! For every $1000 that Liz puts into her super, there is an additional $220 invested – boosting her overall super balance!

This is the TTR strategy I put in place with Liz:

Stage One

I advised Liz to max out her annual super contributions by salary sacrificing an additional $23,000 into super (ie. $35,000 minus $12,000 paid by her employer)

Stage Two

A tax effective pension that will replace the income she’s sacrificing into super was established. Liz will draw $15,360 annually from her super, combined with her wages, this will enable Liz to receive the same level of after-tax income as she was receiving before she implemented this strategy.

This will save Liz around $5,700 in tax in the first year!

Stage Three

If Liz continues with this strategy for the next 10 years, she will boost her super balance by an additional $164,000, while maintaining the same level of after tax income!

Stage Four

Another advantage of the TTR Pension is the assets are free of any capital gains tax!

All of this is achieved for Liz by implementing a TTR strategy and taking advantage of the tax concessions on offer.

As an added bonus for Liz, we also saved her another $3,400 per annum in ongoing superannuation product fees and an additional $3,500 per annum of insurance premiums by updating her insurance to correctly match her current circumstances.

Naturally your situation will be different to Liz’s, and the advantages and benefits will change. However, a confidential discussion with Serge or myself will uncover any benefits and ensure you are capturing all possible tax savings that you are eligible for before the government potentially puts an end to this strategy.

So, what are you waiting for? Call Paris Financial for a confidential discussion Ph. 03 8393 1000.

Darren Foster, Senior Financial Planner, Paris Financial


General Disclaimer: This material is general information only and is not intended to be a recommendation. We strongly recommend you seek advice from your financial planner as to whether this information is appropriate to your needs, financial situation and investment objectives. Whilst every care has been taken in the preparation of this information, Capstone Financial Planning Pty Ltd, its directors, authors, consultants, editors and any persons involved in the preparation and distribution of this newsletter, expressly disclaim all and any form of liability to any person in respect of this update and any consequences arising from its use by any person in reliance upon the whole or any part of this update



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