Recently there have been some changes to superannuation law that allow individuals to contribute larger amounts to their retirement savings without incurring tax liabilities.
In the 2014-15 financial year, the concessional contributions cap has been lifted to $35 000 for people over the age of 49. This means that you can salary sacrifice up to $35 000 each year without attracting a tax liability.
The raised concessional contributions cap is good news for anyone looking to put a little extra away for retirement. There are also some related tax planning strategies that can generate significant savings.
Coupling the high concessional contributions cap for people over 49 with a transition to retirement strategy can be an extremely effective tax minimisation strategy. The concept of ‘transition to retirement’ is designed to encourage Australians to participate in the workforce for longer.
Under the scheme people over the age of 55 can withdraw a partial pension from their superannuation while slowly decreasing their working hours.
In order to minimise their tax bills as they move closer to retirement, some people will draw on the partial superannuation pension but not decrease their working hours. The advantage to doing this is that you can salary sacrifice into your superannuation, thereby enjoying the tax breaks, without experiencing a decline in your income.