They say there aren’t too many benefits of ageing, but a bit of nifty restructuring to reduce wages and increase cashflow in your business is one benefit not to be missed.
The Income Tax Act allows for “more senior” business owners to reduce wages and leave extra cashflow in the business through a mechanism called the Transition to Retirement Pension, which enables a portion of income to be earned from your superannuation fund with considerable tax benefits.
If you are over 55, you can receive a highly tax advantaged pension from your super fund and once you are over 60, the pension becomes completely tax-free. This means that you can earn a portion of your income through your super fund even while you are still working, with the benefit of reducing the wage bill in your business but not compromising your take home income.
One of the major benefits of placing yourself on some form of pension in a super fund is that the income from the assets that support a pension becomes tax-free in the super fund itself.
As an example, if your pension is supported by assets of, say, $200,000 and the fund’s income on those assets is, say, $10,000, normally the tax on that income is $1,500 i.e.15 percent. y simply receiving the minimum pension amount allowable you have saved yourself the $1,500 tax within the super fund quite apart from any tax saving you may make personally by the receipt of the superannuation pension.
Come and hear me, Sid Edwards of Abby Practice and Ryan Love of Apex Partners discuss the details of how to access this benefit at a free workshop on Tuesday 4 September, in Sydney.
Seats are strictly limited so you’ll need to be quick to register.
