Retirement Planning

There are some direct and indirect taxation concessions attached to super-sourced income streams.

In terms of the dire ct concessions, a proportion of the annual income may be tax free, while the taxable portion of the annual income may be eligible for a 15% tax rebate (provided the income stream is not sourced with excess benefits). 

Indirectly, the low-income earner rebate and the new savings rebate also provide some taxation relief. In combination, these concessions (ignoring any entitlement to a tax-deductible amount) may produce a tax-free income of $21,000 per annum for an individual in receipt of a super-sourced income stream. 

Benefits to Clients - Tax effective income in retirement. 

The 15 percent tax rebate - Provided the income stream is not commenced with an excess benefit, a 15% tax rebate applies to the taxable portion of the income stream.

This rebate ensures that no tax* is payable on income streams of up to $20,936 per annum, determined as follows: 

The tax free amount - Super-sourced income streams have another concession which operates to reduce a proportion of the income stream from tax. This amount is referred to as the "deductible amount" or "tax free amount", and is determined as follows:

Tax free amount = Undeducted Purchase Price (UPP) / Life Expectancy or Term

Where UPP* = undeducted contributions plus post June 1994 invalidity component plus CGT exempt component. 

*Different UPP rules apply if the income stream is purchased by rollover of an ETP resulting from the commutation of a pre 1 July 1994 commenced income stream.

Accordingly, if the super-sourced income stream contains any of the elements of UPP, the amount of income which can be received tax free also increases 

What is an allocated annuity? 

How does it work? 

An account is set up in your name and the value of your account moves in line with the changes in the value of the investment assets backing your account. It also reduces whenever income payment and lump sum withdrawals are made.

How much income will my allocated annuity provide? 

You are able to choose the size and frequency of your income payments each year within certain minimum and maximum limits set by the Federal Government. This flexibility makes allocated annuities one of the most popular ways to generate an income stream in retirement. You can vary the level of income payment each year and you can also withdraw lump sum amounts if required. You will continue to be paid as long as there is money in your account. 

What are the benefits of investing in a allocated annuity?

It provides a way to defer or totally eliminate lump sum tax on your superannuation or rollover money. 

• You pay no tax on the investment earnings of your annuity.
• Part of each income payment may be tax free, and the rest could attract a 15% rebate.
• It may help you receive social security benefits.
• You can choose from a range of investment options with varying degrees of exposure to asset types such as shares, property, cash and fixed interest. So you have the opportunity to invest in options with low to high growth potential. 
• Easy to understand. 
• Your income is flexible and you can withdraw additional lump amounts if needed. 
• You can choose how often you want to be paid the income 
• When you die, the balance of your account can be used to pay an income to your spouse until the money runs out or can be paid as a lump sum to the beneficiaries of your estate.

When considering an allocated annuity you should be aware that:

• The value of your account can rise or fall, and cannot be guaranteed, you will need to feel comfortable with the types of asset classes your money is invested in. 
• You will need to regularly review your allocated annuity and income needs as you may outlive your money.
• PAYE tax may be payable on the taxable part of each income payment 
• Lump sum ETP tax may be payable on any lump sum withdrawals you make. 

What is a guaranteed super pension?

A guaranteed super pension is an investment for lump sum eligible termination payments (ETPs) from any accessible superannuation or rollover savings. It provides regular income stream, just like a salary, for either a fixed period of time (fixed term pension) or the rest of your life (lifetime pension). 

How much income will my guaranteed super pension provide?

The income you receive from a super pension will depend on: 

• How much money you invest. 
• How long you want it to run, and how much income you would like to be paid each year (subject to parameters). 
• The interest rates at the time you invest, however you are not affected by any future fluctuations in interest rates once you have invested. 
• Any specific options you include like protection against inflation or payment for a minimum period. 
• The age and sex of anyone who can receive income, where you have selected a lifetime pension. 

What are the benefits of investing in a guaranteed super pension?

• Easy to understand.
• Peace of mind with income payments guaranteed for your life or for a fixed period of time. 
• You can choose how often you want to be paid the income each year.
• The ability to have payments increased in line with inflation.
• The ability to provide for your spouse to receive income from the pension after you die. 
• Tax which would have applied to your ETP is generally eliminated when you invest it in the pension. 
• Part of each income payment may be tax free and eligible for a tax rebate of up to 15% and,
• It may help you receive social security benefits. 

When considering a guaranteed super pension, you should be aware that: 

• Access to a lump sum payment is only possible under special circumstances.
• You become a member of a superannuation fund.
• Once we have both agreed on the terms of your income payments and frequency of payments, they are all fixed at the time you invest and cannot be altered. 

What is a lifetime annuity? 

A lifetime annuity is a type of immediate annuity. It's like a personal pension that lets you invest money and receive a guaranteed and regular income for the rest of your life. You can invest in a lifetime annuity using any accessible superannuation/rollover savings or other savings. 

How much income will my lifetime annuity provide?

The income you receive from a lifetime annuity will depend on:

• How much money you invest. 
• How often you would like the income to be paid each year.
• The interest rates at the time you invest, however you are not affected by any future fluctuations in interest rates once you have invested. 
• Any specific options you include like protection against inflation or payments for a guaranteed period.
• The age and sex of anyone who can receive the income. 

 What are the benefits of investing in a lifetime annuity? 

• Easy to understand.
• Peace of mind with income payments guaranteed for your life. 
• You can choose how often you want to be paid the income each year.
• The ability to have payments increased in line with inflation. 
• The ability to provide for other people to receive income from the annuity.  It can provide a way to defer or totally eliminate lump sum tax on our accessible superannuation or rollover savings.
• Part of each income payment may be tax free and eligible for a tax rebate of up to 15%.
• It may help you receive social security benefits. 

When considering a lifetime annuity you should be aware that: 

• Your income payments and frequency of payments are all fixed at the start and cannot be altered.
• Access to a lump sum payment is only possible under special circumstances, it may not be the best way to manage your cash flow needs, and PAYE tax is payable on the taxable part of each income payment