Superannuation is one of the most tax-efficient retirement savings vehicles that we have access to if we plan to retire in Australia. Despite changing contribution and pension caps, along with pension allowances, your superannuation should not be ignored. This is particularly important point for Australian expats living abroad.
Your superannuation and account-based pensions can form an important piece of your retirement income puzzle, and supplement your offshore investment strategies, when it comes time to say goodbye to your regular salary.
An account-based pension allows you to draw your superannuation as an income stream in a tax efficient manner.
Let’s take a look at exactly how it works.
A lump sum is transferred from your existing superannuation fund into an account-based pension account, which can be done once you’ve reached your preservation age. If you’re unsure at what age this is for you, we’ve included a table below:
You must have reached your preservation age, and also achieved a ‘condition of release’ for your super to commence an account-based pension, such as retiring after your preservation age.
There are also minimum amounts that must be withdrawn each year based on your age, which is outlined in the table below:
There is no maximum amount that can be withdrawn, unless you’re using a Transition to Retirement strategy.
It’s important to remember that you can also decide how your investments will be structured within your account-based pension. This will depend on the level of risk you wish to take on and the assets you wish to hold. For example, you may wish to hold a diversified portfolio of direct equities paying consistent dividends, term deposits and government bonds.
How is the tax-efficiency achieved?
Once you’ve reached 60, your account-based pension payments and other lump sum withdrawals will typically be tax-free. This includes any dividends paid and realised capital gains within your account-based pension.
There are no guarantees
As there are no guaranteed payments and account-based pensions are linked to market performance, it’s important that you keep a close eye on your investments, or work with a trusted financial planner to help manage your investments while you live the retirement lifestyle that you’ve worked to achieve.
As you can see, superannuation and account-based pensions should not simply be ignored, as it can provide a highly tax-efficient retirement income stream if we plan wisely.
To Your Financial Success!
Jarrad Brown is an Australian-trained and qualified Fee-Based Financial Planner with Australian Expatriate Group, division of Global Financial Consultants Pte Ltd providing specialist financial advice and portfolio management services to international and local professionals in Singapore.
Australian Expatriate Group is licensed by Global Financial Consultants in Singapore, with a team of Australian-trained, experienced and qualified, allowing us to provide specialist advice to Australians living abroad.
To learn more about how we may be able to help you, please contact us:
✆ +65 8282 5702
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General Information Only: The information on this site is of a general nature only. It does not take into account your individual financial situation, objectives or needs. You should consider your own financial position and requirements before making a decision.