Transition to retirement
How a member can benefit from TRIS
There are three main was a member can benefit from a TRIS:
- The income payments from a TRIS can be used to replace a member's forgone salary - a member can wind down their career by moving to part-time employment a TRIS could enable them to top-up their income. So, there net income remains the same, even though they are working less.
- A member can use the income to make additional repayments to debt prior to retiring.
- A member can top-up their superannuation without forfeiting their net income.
|Example - TRIS and salary sacrifice
Ben, age 55, is an Architect who earns salary package of $110,000 pa. including super. He has no immediate plans of reducing his work hours as he considers 65 as a perfect time to retire completely from the workforce. Ben has $465,000 in super which consists wholly of a taxable component and is fully preserved. The super is invested in a balance option and has earned 6.5% pa. on average in the past few years.
Ben is considering a TRIS strategy which will require him to salary sacrifice a greater portion of his pre-tax income to superannuation. Ben currently receives take-home pay of $74,547.62 and $9,543.38 employer super guarantee contributions into his super. Ben decides to salary sacrifice $15,000 (concessional contribution cap of $25,000) per year into super. Contributions tax of 15% deducted leaving him $12,750 to invest in his superannuation fund. Ben now receives an after tax take-home pay of $65,506.62.
Ben uses his superannuation to start a TRIS with $465,000. He draws the minimum of $9,300 from his TRIS to replace the reduced salary.
This technical resource is intended for the use of financial advisers only. It is current as at the date of publication but may be subject to change. This publication has been prepared without taking into account a potential investor's objectives, financial situation, needs or objectives. Before making a recommendation based on this material, you should consider its appropriateness based on the client's objectives, financial situation and needs. Rainmaker Group is not a registered tax agent under the Tax Agent Services Act 2009. Your client should refer to a registered tax agent before relying on information published herein that may impact their tax obligations, liabilities or entitlements.
Last modified: Wednesday, September 30, 2020