The Government provides many incentives for people to save for their retirement. The most important are:

Superannuation

Employers are required to make contributions to super on behalf of each employee at a rate 9% of ordinary earnings. Concessional rates of tax apply to these contributions, and to investment earnings within the fund. Many people rely on just the compulsory contributions, but for many people, particularly those retiring in the next few years, these may not be enough to provide for a comfortable retirement.

Salary Sacrifice

You can arrange for your employer to make additional pre-tax contributions to super. These contributions will be taxed at 15% in the fund, but this is substantially less than the level of tax most people would pay if the money was taken as salary or wages. Salary Sacrifice is a tax-effective means of saving for retirement - learn more about how it works.

Government Co-contribution

If you are in paid employment or are self employed, you may be able to receive an additional superannuation contribution of up to $1,500 each year from the government. In order to receive the full $1,500, you will need to make a contribution out of after-tax money of $1,000, and you need to be earning less than $28,980 a year. The government co-contribution is not available if you earn more than $58,980 a year.

How much are you eligible for?

Super Income Stream (Allocated Pension) and Transition to Retirement

Whether you are retiring or transitioning to retirement (see below), you can roll your money from your accumulation super fund into a super income stream. You will receive regular income payments from your super income stream, and like any other investments the returns received will be subject to market movements.

There is no tax on the earnings (such as interest and dividends) in a super income stream. For people aged 60 and over there is no income tax on either lump sum withdrawals or on the regular income payments*. Payments for people under age 60 are also favorably treated.

If you are over 55, you can start to receive payments from your super fund, even if you are still working:

• Switch to part-time work or a less demanding role without having to reduce your income. Ease into full retirement by 'topping up' your income needs with regular payments from a super income stream; or
  
• Significantly increase your current super balance, gaining the tax benefits by salary sacrificing larger sums into super and supplementing your income with regular payments from a super income stream.

Fact Sheet: Transition to Retirement (143 kB, Aug 08)

Need advice?

Confused by all of this? That’s not surprising. Superannuation is a complex area, and it’s important to obtain expert advice. An IFFP financial planner can help you!

*Taxes still apply to the taxable component of death benefit lump sums to certain beneficiaries.