RSM Australia

Tax-free super under age 60?

Wealth Management Insights

shutterstock-260239211.jpg

There has been some media coverage recently about a tax savings strategy for those aged 56 to 59. We’re taking a cautious approach.

The Strategy

Many super fund members aged between 56 and 59 start accessing their superannuation benefits. This has a tax saving being that investment income, such as interest, dividends, rent and capital gains, earned on their proportion of the fund becomes tax free. Countering this is money received by the fund member gets included as taxable income in their personal tax return.

A very small number of fund members can avoid the money they receive being included in their personal tax return.

The Australian Taxation Office (ATO) has expressed a view in a Private Binding Ruling that has been reported as everyone in this age bracket can avoid the money being included in their personal tax return.

If this strategy works then it would mean nearly all taxpayers in this age bracket could receive superannuation benefits tax free.

Caution

RSM advisor’s experience has seen over the years a variety of strategies that have initially received ATO sign off, but later seen the ATO announce that the strategy doesn’t work. Our experience feels this strategy will go the same way.

Should this occur, only those who’ve been given a Private Binding Ruling (PBR) by the ATO are able to rely on this.

Action

Our expectation is that for a limited time the ATO may issue PBRs, before stopping and putting all PBR applications on hold.

We believe it is best to get a PBR for both your superannuation fund and you personally should you be interested in exploring this strategy. Please contact your SMSF adviser to discuss further should you be interested in looking at this strategy.

RSM Financial Services Australia Pty Ltd AFSL 238282