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Case Study: Retired & Aged 60+


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Commencing a Pension after 60

Commencing a Pension after the age of 60 can result in significant taxation savings. This is because you pay no tax on your share of the SMSF income and realized capital gains once you commence the Pension. So whether your share of the SMSF earns $1 or $1,000,000 in income and realized capital gains, you will pay no tax if they are derived after commencing the Pension. Similarly there is no tax payable on the Pension Withdrawals accessed from the SMSF after age 60.

 
 
Case Study Example

Let's consider a Case Study demonstrating how much tax you can save by commencing a Pension after the age of 60 when you are "Retired".

Example:

Barney is 61 and has recently "Retired".  Barney has a Super Benefit of $1,000,000.  His Super Benefit is broken down into a "Taxable Component" of $800,000 (built up from Employer Contributions) and a Tax Free Component of $200,000 (built up from Personal Non Concessional Contributions).  This means that 80% ($800,000 / $1,000,000) of Barney's Super Benefit is Taxable and $20% ($200,000 / $1,000,000) is Tax Free. 

Barney commences a Simple Account Based Pension on 1 July, 2015.  This is the appropriate Pension to commence given that Barney is "Retired". Barney must access 4% of his Super Benefit as a Pension, that is $40,000. The Tax Free portion of the Pension Income is 20% (i.e. $8,000) and the Taxable portion of the Pension Income is 80% (i.e. $32,000). 

Barney has no other Taxable Income given he has "Retired". The SMSF has generated a Taxable Income of $60,000 made up of taxable interest and dividend income and realised capital gains from the sale of shares during the financial year. Franking Credits on the dividend income total $10,000.

 
 
Case Study Analysis

Tax Result in SMSF With Pension No Pension
SMSF Income $60,000 $60,000
Dividend Gross Up $10,000 $10,000
Total Income $70,000 $70,000
Tax on SMSF Income $0 ($10,500)
Franking Rebate $10,000 $10,000
SMSF Tax Refund / (Payable) $10,000 ($500)

 

Tax Position in Personal Name With Pension No Pension
Taxable Pension Income $0 $0
Tax Payable $0 $0
Low Income Tax Rebate $0 $0
Pension Rebate $0 $0
Personal Tax Refund / (Payable) $0 $0

 

Overall Tax Result With Pension No Pension
SMSF Tax Refund / (Payable) $10,000 ($500)
Personal Tax Refund / (Payable) $0 $0
TOTAL Tax Refund / (Payable) $10,000 ($500)

 

 
 
Case Study Result

As the above example demonstrates commencing a Simple Account Based Pension after the age of 60 has saved Barney $10,500 in tax.  This is an annual tax saving and demonstrates the taxation savings available by commencing a Simple Account Based Pension after age 60!

 
 
Interactive Pension Analysis

To demonstrate how the above analysis may change with changes in the variable inputs we have devised an Interactive Calculator for our clients.  The Interactive Calculator allows you to quantify the taxation savings available to you by commencing a Simple Account Based Pension after age 60, using your own personal circumstances.  To view our Interactive Calculator, please visit our Interactive Pension Analysis here to and see how much tax you can save!

 
 
Apply Now

To establish a Simple Account Based Pension simply visit our Online Application Form here.