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Reducing tax in your SMSF

There are some effective, and often quite simple, strategies to reduce the tax payable in an SMSF that many fail to take advantage of.

Nomination of beneficiary
Those who nominate a spouse, child or financial dependent as a beneficiary may avoid paying tax on a lump sum death benefit.

Delaying TTR commencement
Members looking to begin a transition to retirement pension in their late 50s may delay this decision until age 60. The benefit of waiting is that members avoid being taxed on super fund pension payments. This strategy may be particularly useful for members who are still working or have other taxable income outside super.

This strategy involves taking lump sums or pension payments with a high taxable component out of a fund and replacing them with tax-free non-concessional contributions. It is important that the non-concessional contribution is separated from the taxable components in the accumulation balance to avoid losing the benefit of the re-contribution.

Lump sum withdrawals
This solution is suited to members who have a short time to live. They can withdraw all assets from their super fund and their children can avoid any tax upon death. The catch is that if they live longer than expected, they may not be able to transfer the money back into their super account.

Posted on 15 September '15 by , under Super.

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Transition to retirement

The transition to retirement (TTR) strategy allows you to access some of your super while you continue to work.

You are able to use the TTR strategy if you are aged 55 to 60. You can use it to supplement your income if you reduce your work hours or boost your super and save on tax while you keep working full time.

  • Starting a TTR pension: To start your TTR pension, transfer some of your super to an account-based pension. You have to keep some money in your super account so that you can continue to receive your employer's compulsory contributions as well as any voluntary contributions you may be making.
  • Government benefits and TTR: The benefits you or your partner receive might be impacted if you choose to opt for this strategy. How and what exactly will change might become clearer upon discussing this with a Financial Information Service (FIS) officer.
  • Life insurance and TTR: In some cases, the life insurance cover you have with your super may stop or reduce if you start a TTR pension – check this before making any decisions or changes.

TTR can help ease your mind as you transition into retirement but it can be a bit complex. Before you choose whether you want to use TTR to reduce work hours or save on tax, or even if you want to use TTR altogether, you should figure out how this will impact all aspects of your finances.

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