A TTR pension allows you access to some of your super when you’re approaching retirement. This means you can supplement your income with the super you’ve accumulated throughout your working life.
Mark, aged 60, works full-time, earns a salary of $80,000 p.a. (or $61,383 after tax) and has $400,000 in super. He wants to cut back to a three-day working week.
While Mark’s salary will reduce to $48,000 p.a., he doesn’t want to compromise his living standard. He invests his entire super benefit in a TTR pension and draws an income of $20,680 over the next 12 months.
By using this strategy, he’ll be able to replace his pay cut of $32,000 and continue to receive an after-tax income of $61,383 p.a. He’ll also pay $11,320 less tax. This is because the TTR income payments are tax free because he is 60, whereas his salary is fully taxable at his marginal rates.
|In year one||Before strategy||After strategy|
|TTR pension income||Nil||$20,680|
|Total pre-tax income||$80,000||$68,680|
|Less tax payable||($18,617)||($7,2972)|
1. Assume the TTR pension is commenced from a taxed super fund.
2. Tax on $48,000 as TTR pension income is not taxable.
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