Are You Over 60 and Still Working? You need to know this about your super!
Over 60 and still working? Thinking the benefits from super are still a long 5 years away? This blog may just change your mind (and your wallet)!
One big disclaimer before you continue; the information contained in this post is general information only and should not be relied upon. As always seek advice from a finance professional about your personal circumstances before making any changes.
We are giving away the secret to one of the powerful strategies that our clients use to minimise tax and maximise cash. It’s time to make you super work for you, today, not in 5 years! So if you’re 60 or over and still working this is for you.
First things Frist – You DON’T have to wait until 65 to get access to your super!
It is time to introduce the magic that is Transition to Retirement Income Stream’s (TRIS). A TRIS allows an individual who has reached their preservation age (between 55 and 60 depending on when you were born) but who are still working, to access a portion of their superannuation.
The best part? If you're over 60, the income you draw from your TRIS is tax-free!
OK next – Types of super accounts - Accumulation Phase vs Pension Phase
Understanding the difference between these two phases is crucial:
Accumulation Phase: This is where your super grows through contributions and investment earnings. Income and capital gains in this phase are taxed at 15%.
Pension Phase: Once you convert your super into a pension account (TRIS or another retirement income stream), the earnings on investments within the pension phase are tax-free. Bonus, if you're over 60, the income you draw from your pension account is generally tax-free as well.
So, by not paying attention to your super once you turn 60 and doing nothing your fund will stay in accumulation phase costing you 15% tax per year until you start a pension. It’s like volunteering to donate your hard-earned super to the ATO. By shifting some of your super from the accumulation phase to the pension phase, you can potentially reduce the tax paid on investment earnings from 15% to 0%.
The Holy Trio – How to use salary sacrifice to have your cake and eat it too.
A highly effective tax strategy for over-60s who are still working is combining salary sacrifice with TRIS. Here’s how it works:
Salary Sacrifice: Redirect a portion of your pre-tax salary into your superannuation. These contributions are taxed at just 15% inside your super fund, which is likely lower than your marginal tax rate.
TRIS Withdrawals: Use a TRIS to draw down a portion of your super to supplement your income. If you're over 60, these withdrawals are usually tax-free.
Case Study
Let’s say you earn $100,000 per year and are over 60:
You decide to salary sacrifice $10,000 into your super. Instead of paying your marginal tax rate on that $10,000, it’s taxed at 15% inside your super fund, saving you up to 30% tax.
You then draw $10,000 tax-free from your TRIS to replace the sacrificed income. This way, your overall income remains the same, but you’ve significantly reduced your tax liability.
The Fine Print
As with anything good, its always important to understand the conditions and restrictions.
Contribution Limits: Ensure you stay within the annual concessional contribution cap (currently $27,500 as of 2025) to avoid penalties.
Preservation Age: This strategy is available to those who have reached their preservation age (between 55 and 60, depending on your date of birth).
TRIS Minimums and Maximus – Once you have started you TRIS say for $100,000 you can only draw a maximum of 10% of the balance, but you must draw a minimum of 4%.
Financial Advice: Superannuation and tax strategies can be complex. Consulting with a financial adviser or tax professional can help tailor the approach to your specific circumstances.
If you're over 60 and haven't explored these opportunities, you could be leaving money on the table.
