Scenario 1 - Background

Genevieve is age 62 and is considering retiring permanently from the workforce however she is concerned that she may become bored in retirement. She has come in to discuss issues around taking a pension from her superannuation account which is currently in accumulation phase.

She has sought your advice regarding some superannuation issues she is unsure about.

Required:

Answer Genevieve's queries in a way that will be both clear to her and also comprehensive.

Question 2.1

If Genevieve commences a transition to retirement (TTR) income stream (pension) after 1 July 2017 while she continues to work, explain how the earnings on her superannuation investments will be taxed.

Question 2.2

Explain to Genevieve how the tax treatment of her super investments will be different if she retires permanently from the workforce and then commences a retirement phase income stream (pension).

Question 2.3

Genevieve has now decided to continue working and commence a transition to retirement (TTR) income stream (pension). At what stage will Genevieve have a transfer balance account with the ATO?

Question 2.4

Explain to Genevieve, in detail, the difference between the tax-free component of her super and the taxable component of her super. Note that the taxable component comes from a taxed fund. You should mention what is included in each of the components.

Question 2.5

If Genevieve was able to withdraw money from her super fund, explain how each component would be treated from a tax perspective.

Scenario 2 - Background

Genevieve's sister, Fiona, is age 59 and has permanently retired from the workforce.

Fiona is considering withdrawing a lump sum of $250,000 from her superannuation fund, which is a taxed fund. Her total super benefit is $700,000 and 90% of the total benefit is a taxable component. The other 10% of the benefit is a tax-free component.

Required:

Answer Fiona's queries in a way that will be both clear to her and also comprehensive.

Question 2.6

Explain how Fiona's withdrawal will be treated for tax purposes.

Question 2.7

Calculate the amount of tax, if any, which will be payable if Fiona does withdraw a lump sum of $250,000.

Question 2.8

Instead of taking a lump sum, Fiona uses her $700,000 to commence a retirement phase income stream and withdraws the minimum annual pension amount. How much will she have to withdraw in the first year?

Question 2.9

If Fiona only withdraws the minimum annual pension amount for the year,explain how the withdrawal tax will be calculated.

Scenario 3 - Background

Fiona used to work with Patty and they are now best friends. Whilst Fiona chose to permanently retire, Patty, who is 62 years old, has decided to leave the company where she and Fiona worked for the last 25 years and start a new job with a rival company.

Question 2.10

Patty would like to renovate her home and asks you if she is able to access her superannuation money.

Advise if this is possible and explain why/or why not?