Accessing your super whilst still working

You no longer need to retire to access your superannuation. Instead, you can continue to work either part-time or full-time and access part of your super. It is done through a Transition to Retirement Income Stream (TRIS) and is available to anyone who has reached their preservation age which, if you were born before 1 July 1960 is 55, and it rises to 60 for those born after 1 July 1964.

The current pension rules for TRISs require a minimum pension payment of 4% of your superannuation account balance and a maximum of 10% annually. You cannot take your superannuation as a lump sum.

If at any time you wish to cease receiving income from your TRIS, your super fund will once again operate in the same manner as it did before implementing the TRIS. When a condition of release is met, such as you reach retirement age or retire, your TRIS automatically converts to a normal superannuation pension.

A very attractive option

Using a TRIS to supplement your income in the lead up to retirement can be very advantageous (see the example below). It is an ideal way to reduce your working hours but not your income and you can also use the income from a TRIS to enable you to salary sacrifice more of your employment income, reducing your overall income tax. If you are under 60 the TRIS payments must be included in your taxable income, however you will receive a 15% tax offset. If you are over 60 your TRIS payments are tax free.

A major benefit of a TRIS is that it changes the taxable income and capital gains earned by the investments in your super fund. The portion of your fund that supports your TRIS payments becomes tax exempt.

A compelling example

Fred is 62 and plans to retire in another three years and he would like to boost his superannuation savings as much as possible. He would also like to take full advantage of the $50,000 limit that can be taxed at 15%, available for 2011 and 2012, without reducing his disposable income. His current fund balance is $500,000, is 100% taxable and is currently earning 4%. He earns $110,000 and his employer pays Super Guarantee contributions of $9,900. Fred decides to salary sacrifice $40,100 and commence a TRIS with his $500,000 superannuation balance.

The following table demonstrates that he can maintain his disposable income whilst reducing his tax by about $11k. The last line of the table also indicates that, by using a TRIS, he can also increase the balance in the super fund by almost $12k. These are very compelling reasons to consider Transition to Retirement Income Streams and clearly there are many advantages as you approach retirement. Consideration needs to be given to all of your circumstances prior to commencement of a TRIS. Saward Dawson would be very pleased to advise you about the best way forward.

Also see our FocusOn Superannuation Pension Strategy (TRIS).

Published : 24 May 2010