Case study - pre-retirement
Josie is 55 and working full-time. She earns a gross salary of $76.000 p.a. Josie has $350,000 in super, including after tax contributions of $100,000.
To take advantage of the super changes, Josie can transition to retirement using the following strategy:
- Salary sacrifice $38,000 pa
- Transfer current super to a non-commutable allocated pension (also called a pre-retirement pension).
- Draw pension income required to remain in the same after tax position.
The table below highlights the benefits of implementing this strategy.
| |
Do nothing |
Implement strategy |
| Gross income |
$76,000 |
$67,400 |
| Tax payable |
$18,640 |
$10,035 |
| Net income |
$57,360 |
$57,365 |
| Super balance |
$377,046 |
$40,782 |
| Pension balance |
|
$345,100 |
| Net balance |
$377, 046 |
$385,885 |
| Balance at 65 |
$720,248 |
$870,639 |
Comparing the first two columns you can see that for the first year Josie enjoys the same net income with a lower gross income ($38,000 salary plus $29,400 pension, a total of $67,400) because she pays less tax overall. Her overall net balance is higher and improves significantly by the time she reaches 65.
