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Transitioning to retirement pension in an SMSF

The transition to retirement income pension is quite straight forward, however whether there are clear benefits depends on an individual’s personal circumstances.

When an individual starts the transition to retirement income pension (TRIP) once they reach preservation age and are still working, they receive an income stream from their SMSF.

Their existing account balance in their SMSF simply becomes a pension account, and any future contributions will go to a new accumulation fund in the same SMSF.

The minimum income an individual is required to receive each year is 4 per cent of the balance of their pension account. The maximum income stream they can receive is 10 per cent of the balance of their pension account.

When an individual starts their TRIP, they must instruct their employer to reduce the amount of salary received, and instead salary sacrifice this amount into their SMSF. The maximum salary sacrifice that can be made is $35,000 a year. This includes any employer contributions, such as the compulsory 9.5 per cent employer contribution.

The main benefit of a TRIP is to do with reducing tax. Reducing take home salary means reducing assessable income (which is taxed at an individual’s marginal tax rate). Converting to a TRIP and changing your SMSF to a pension account also means tax on any income your pension account earns, including CGT, will be reduced to zero.

In a lot of cases, implementing a TRIP can mean a significantly higher retirement balance, so it is something everyone should investigate.

Posted on 4 September '15 by , under Super.

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What to consider when consolidating your super

The ATO reported that 45% of working Australians were not aware that they had multiple super accounts in 2016. Having multiple super accounts is particularly common for individuals who have had more than one job. If this is you, it is important to identify and manage your super accounts because having more than one can be costly as a result of account fees from multiple funds.To combat this, you may want to consolidate your super, which moves all your super into one account. Not only does this save on fees, but it also makes your super easier to manage and keep track of.

Before consolidating your super, it is important to do the following:

Research your funds' policy
Compare your active super accounts so you can make the right choice about which one you should close. Things to assess include:

  • Exit fees
  • Insurance policies
  • Investment options
  • Ongoing service fees
  • Performance of the funds

Check employer contributions
Changing funds may affect how much your employer contributes, as some employers contribute more to certain funds. Check your current accounts to see if changing funds will affect this. Once you have selected a super fund, regardless of whether you choose a new super fund or one of your existing ones, provide your employer with the details they need to pay super into your selected account.

Gather the relevant information
When consolidating your super, you will need to have the following details ready:

  • Your tax file number.
  • Proof of identity. This could include your driver's license, birth certificate or passport.
  • Your fund's superannuation product identification number (SPIN).
  • Your fund's unique superannuation identifier (USI).
  • Details of your previous fund.

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