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Tax and my super investments

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I have money invested in and outside of super and will soon retire but I might go onto a pension straight away. How are the various investments/savings treated?

When you’re retired, your investment earnings from your super fund are free of tax. Any capital gains made on your investments before you retire are also tax-free. By the way, your franking credits from the shares you could hold on the dividends then become a refund from the tax office! If the company’s tax rate is 30 per cent but your tax rate is zero because you’re retired, any tax the company pays on these related shares comes back to you as refund. The income you want to take out of your fund is limited by the age-based minimum but once again when you are over 60, there’s no tax.

For money outside of super, you will be slugged the normal tax rates. By the way, if you pass 60, you don’t have to go onto the pension. Some people do part-time work or go holidaying, spending money outside of their super fund. Provided you’re over 60, you can withdraw lump sums from super and they will come tax-free. Your dividends from shares will be slugged at 15 per cent but franking credits can more than wipe out this slug.

As you can see, there are a number of rules and regulations you should get to know. If you don’t want to do your homework, you might think of getting an adviser who specialises in these questions and answers that many retirees have.

For money outside of super, you should look at the after-tax contributions, which means you can slip outside super money into super without tax penalties but these are subject to age restrictions. Know these well with respect to your age to avoid making a mistake that can attract an unwanted higher tax slug.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

Published on: Wednesday, February 09, 2011

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