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But it says that tax bill can be minimised by moving their super to a tax-free pension account.
Mardy Chiah, an associate professor of finance at the University of Newcastle, said eligible retirees could consider a pension account to save on taxes.
Who is eligible for an account based pension?
Chiah said you must first meet conditions of release to qualify for the tax-free scheme. These can include:
- Reaching preservation age and retiring. Preservation age is the minimum age at which you can access your super, ranging from 60 to 65, depending on your birth date. After reaching your preservation age, you must retire with no intention of returning to full-time or part-time work.
- Reaching age 65. Once you are 65 years old, you can access your superannuation without any restrictions, regardless of your employment status.
- Permanent incapacity. If you’re permanently unable to work due to a physical or mental condition, you may access your super.
- A diagnosis of a terminal illness with a life expectancy of less than 24 months.
“Once you confirm your eligibility above, contact your super fund provider of your intent to commence a retirement income stream. They will provide the necessary forms and guidance,” Chiah said.
What are the benefits of an account based pension?
“Third, establishing an account-based pension provides a steady income during retirement, with the flexibility to adjust payment amounts within set limits.”
Read the terms and conditions
Rattigan added that you don’t have to rollover the full amount so you can maintain your super account if you are still working or planning to contribute.
Tax-free investing
“However, keeping the money inside super helps protect against paying tax on earnings if you receive an inheritance or you receive the Age Pension which is a taxable income and therefore counts towards your tax-free threshold.”
Where should you go for advice?
The information in this article is general in nature and is not intended as financial advice. You you should consult with a licensed professional to make the decisions that are right for you.
