In Australia, there is no fixed age for retirement. You can retire whenever you wish, but remember that pension will start only when you turn 67. So, whenever you retire, make sure you are financially prepared for the new phase of your life. A well-crafted pension and benefit design are necessary so that you cannot face any hardship once a regular income stops. This blog discusses how you can plan for your retired life and how an SMSF will benefit you.
The money necessary to fund your retired life may come from a range of sources, which includes:
In general, a superannuation fund can be accessed once the holder reaches the preservation age. Depending on your year of birth, your preservation age will be in the range of 55 to 60. For most people, superannuation balance forms a considerable part of the savings.
You may sell your investment property or use the income generated from holding shares. An inheritance from your family estate can also help you financially.
Depending on your income, assets, or circumstances, you may be eligible to receive part or full pension from age 65 to 67. You can also receive other government benefits like a carer’s allowance or disability support pension. Holding concession cards or the Commonwealth Seniors Health Card will help you get discounts on various expenses.
In Australia, self-managed superannuation funds are one of the most feasible ways to cover different costs in life after retirement. Like other superannuation funds, SMSFs also provide individuals with a lump sum or pension benefits. Unlike other super funds, members of an SMSF are also trustees who can run the fund for their benefits and thus remain compliant with the laws. If you have crossed 60, your super benefits will be free of any tax.
When you begin a super pension income stream, you will be required to transfer money from your savings account to your retirement account to receive your pension. The maximum amount that can be transferred into the retirement account is $1.7 million. Remember that a minimum percentage of the retirement account balance must be withdrawn each year, and this amount will vary according to your age.
If you have reached your preservation age while still working, TTR (transition-to-retirement) pensions can start.
Exploring the following SMSF strategies can help you grow your superannuation fund using assets and property.
A key benefit of making a personal contribution to your superannuation fund is that it will help you claim a tax deduction for that contribution. Make sure that the contribution is made directly from your bank account.
Purchasing an investment property or an SMSF property through an SMSF is becoming a highly popular strategy among people indulged in the SMSF business. Such a direct property investment helps individuals receive rental income and capital growth, which are taxed at a low rate.
According to the law, you can neither purchase an SMSF property and start living in it nor give it to any relative on rent. However, if you operate a business, there is no problem purchasing a commercial property using an SMSF and leasing it to your business.
With an SMSF, you can borrow money to buy a property or a collection of identical assets with the same market value as a parcel of shares. It can be achieved via an LRBA (Limited Recourse Borrowing Arrangement). Borrowing in an SMSF provides some benefits, including tax benefits, leverage, and asset protection.
You can withdraw your super fund and re-contribute it back into your SMSF. This strategy will provide you with the following benefits:
- Tax planning
- Estate planning
- Increasing Centrelink Benefits
- Utilising Transfer Balance Cap ($1.6 million) of you and your spouse
Once you reach your preservation age and have fulfilled the necessary retirement conditions, you may consider allocating up to $1.6 million to begin an account-based pension. This pension will convert your accumulation balance into the retirement phase, where earnings are free of taxes.
According to the law, if your age is 65 years or more and you satisfy all the eligibility criteria, you will be able to make a downsizer contribution of up to $300000 into your SMSF in Australia.
As an SMSF trustee, it will be your responsibility to stay compliant with all the government rules. Otherwise, you may lose your position to enjoy the benefits. That is why it is recommended to contact SMSF accountants Perth Services to carry out an SMSF audit regularly to make sure all the financial records are accurate, and the fund obeys the rules.