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The transition to retirement pension allows people to access their Superannuation benefits while remaining in the workforce once they have reached their preservation age (usually fifty-five (55) years of age). This law came into effect on 1st July 2005 and gives individuals more flexibility to develop strategies in the transition to retirement. The Australian Taxation Office (ATO) has issued a media release to clarify how transition to retirement pensions will be treated. Some strategies have encouraged people to draw down on their Superannuation by accessing a transition to retirement pension, while, at the same time, salary sacrificing back into their Superannuation savings. This act of salary sacrificing reduces the taxpayer's otherwise taxable income derived from their continuing work duties and allows the taxpayer to fund their living expenses via a tax-effective pension. The ATO does not consider that such a strategy comes within the scope of tax avoidance, as long as the salary sacrifice arrangement is genuine and not contrived in any way. Grant Hodgins - Director Advantage One Strategic Financial Coach |
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