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Allocated pension, tax on earnings in fund

Discussion in 'Investing Strategies' started by GG, 13th Nov, 2009.

  1. GG

    GG Active Member

    Joined:
    21st Oct, 2009
    Posts:
    35
    Location:
    Sydney, NSW
    I thought that this is an interesting article

    But I'm not clear on this statement:

    Arrhhh, the magic of tax arbitrage!! You are spot on in that it would not make sense to draw down on money not required, especially seeing as most super funds actually pay closer to 7% tax, rather than the maximum 15% - so the saving by switching to allocated pension is not as much as it first appears.

    Wouldn't you still get an improvement of 15% in that the fund would be getting tax credits?
     
  2. Billv

    Billv Getting there

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    15th Jul, 2007
    Posts:
    1,796
    Location:
    Sydney, NSW
    GG
    good article
    cheers
     
  3. AsxBroker

    AsxBroker Well-Known Member

    Joined:
    8th Sep, 2007
    Posts:
    1,448
    Location:
    Sydney, NSW
    Hi GG,

    What the planner is saying is that the main benefit of under 65s to start drawing an allocated pension is based on them working (TTR strategy) rather than purely flipping from superannuation accumulation tax rates to allocated pension tax rates. They are also assuming that the persons income is over $80,000 pa and that they have $500,000 in superannuation as well as the clients risk profile. The more defensive an investor is the closer to 15% tax they will pay on their super funds income. For a more aggressive investor eg, mainly shares, there may only be a small portion of income and mainly growth (which is taxed at 10% if the asset has been held for longer than 12 months).

    Hope this helps.

    Cheers,

    Dan

    PS This is general information before making an investment decision speak to your FPA registered Financial Planner.