Tax Savings for Retirees
Many retirees are not aware of the powerful tax benefits, even outside of superannuation, that they could be taking advantage of. If you’re aged 60 or over, any withdrawals from a taxed super fund are completely tax-free. If you have an untaxed fund such as a government super fund, different rates may apply.
You can also access the following taxation benefits available to eligible retirees outside of superannuation:
1. If you are under the Age Pension age, you can earn income of up to $20,542 before any income tax is payable. 2. But once you reach Age Pension age, you are entitled to the far more generous tax-free limits available to you through the Seniors and Pensioners Tax Offset (SAPTO). With the benefit of SAPTO, the amount you can earn each year as a pensioner before having to pay tax is: • $32,279 for a single peson, • $28,974 each for member of a couple or $57,948 combined. 3. Even if you taxable income exceeds these amounts, you may still be eligible to a partial tax offset to reduce the tax payable. The upper limits to receive any offset are: • $50,119 for a single person, • $41,790 each for member of a couple or $83,580 combined.
Example John and Sue are both 72 years of age. John receives $40,000 in pension payments from his superannuation fund. They also hold a joint term deposit outside of their superannuation earning $50,000 in interest each year. With a combined assessable income of $50,000, they will pay no income tax on this assessable income. A sizable tax saving! These tax breaks tend to mean many Australians do not lodge tax returns once they reach retirement and pension age. However, if you do earn below the amounts outlined above and don’t plan to lodge a tax return, you still need to let the tax office know of your situation.
Speak to us at Tardrew Partners to confirm your eligibility as each individual’s tax position varies depending on their circumstances.
Please note: The rates used are current for the 2017/2018 income tax year and subject to change in the future.
The above information is intended as a guide only to provide a quick overview of some of the general information relating to tax savings for retirees. Please contact Tardrew Partners to obtain advice tailored to your individual circumstances.