Tax Strategies For Australians Approaching Retirement

Tax Strategies For Australians Approaching Retirement

Thinking about when you’ll be retired and enjoy life more? 

Before you get there, there’s something to sort out: taxes. 

They can eat into your savings, but don’t worry! KPG Taxation is here to help with simple tips on how to pay less tax and get more from your retirement money. 

So, let’s dive in together and make sure your retirement dreams stay golden! 

After all, who doesn’t want to make the most of their hard-earned cash when it’s time to kick back and relax?

Tax Implications In Retirement

Once you retire, your income sources will likely change. Instead of a regular salary, you might rely on superannuation payouts, the Age Pension (government benefit for retirees), and income from investments. 

Each of these income streams has different tax implications.

  • Superannuation:  Superannuation offers significant tax benefits throughout your working life and even in retirement. Contributions are typically taxed at 15%, and depending on your age when accessing your super, you may receive tax-free payouts.
  • Age Pension: The Age Pension is a means-tested benefit from the government. The amount you receive and the tax you pay on it will depend on your income and assets.
  • Investment Income:  Income from investments such as dividends and interest can be taxed at your marginal tax rate.

Understanding how these taxes work allows you to develop strategies to minimise your overall tax liability in retirement.

Tax-Effective Strategies For Australians Approaching Retirement

Here are some key strategies Australians approaching retirement can use to reduce their tax burden:

1) Maximise Concessional Contributions

Concessional contributions are contributions made to your super fund in pre-tax dollars. This means the money is taxed at a lower rate (currently 15%) compared to your marginal tax rate.

The Australian government sets a yearly cap on concessional contributions. Taking full advantage of this cap allows you to grow your super balance more tax-effectively.

2) Salary Sacrifice

Salary sacrifice is a strategy where you agree to reduce your pre-tax salary and contribute the difference to your super fund. This reduces your taxable income, meaning you pay less tax upfront. 

Additionally, contributions made via salary sacrifice are taxed at the concessional rate of 15% within your super fund, further boosting your retirement savings.

Here's a table summarising the benefits of Salary Sacrifice:

Benefit Description
Lower taxable income Reduces your overall tax payable
Concessional tax rate within the super Contributions are taxed at 15% instead of your marginal tax rate
Grows your super balance faster Increased contributions lead to a larger retirement
Let’s understand the process in detail.

Transition To Retirement (TTR) Pension

A TTR pension allows you to access a portion of your superannuation while still working part-time. This strategy can be beneficial if you’re looking to ease into retirement or need to supplement your income while reducing your working hours. TTR pensions offer tax benefits depending on your age:

  • Age 60 or older: Income from your TTR pension is generally tax-free.
  • Age 55 to 59:  Income is taxed at your marginal tax rate, but you receive a 15% tax offset, effectively reducing your tax liability.

Utilise Carry-Forward Concessional Contributions

If you haven’t used your full concessional contribution cap in previous years, you may be eligible to carry forward unused amounts for up to five years. This allows you to make larger contributions in the future and potentially reach your superannuation goals faster.

Review Your Super Fund Investment Options

Different investment options within your super fund have varying tax implications. For instance, investing in growth assets like shares might attract capital gains tax when you sell them. Consulting a financial advisor can help you choose investment options within your super that align with your risk tolerance and tax goals.

Consider Making After-Tax Contributions

While after-tax contributions are not taxed upfront, they are taxed within your super fund at a flat rate of 15%. This can still be tax-effective compared to your marginal tax rate. However, after-tax contributions do not count towards your concessional contribution cap.

Claim Senior And Pensioner Tax Offset (SAPTO)

The SAPTO is a tax offset available to eligible Australian seniors and pensioners. It helps reduce your overall tax liability, potentially even eliminating it entirely depending on your income and circumstances.

How To Plan For Different Retirement Phases?

It is often said that retirement is a journey, not a destination. Your financial needs and priorities will likely change throughout your retirement years. 

Here’s how you can adjust your tax strategies to different retirement phases:

Early Retirement

Early retirees might be more active and have higher expenses for travel, hobbies, and supporting adult children. Maximising tax-free income from super and Age Pensions can be a priority. Strategies like salary sacrifice and bringing forward unused concessional contributions can help grow your super balance for this phase.


In mid-retirement, some people might downsize their homes or adjust their lifestyles, leading to potentially lower expenses. This could be a good time to review your super investment options and potentially shift towards income-producing assets within the super fund.

Late Retirement

Healthcare costs may become a significant concern in late retirement. Ensuring you have enough tax-effective income to cover these costs is crucial. Reviewing your Age Pension eligibility and potential tax concessions on medical expenses can be helpful during this phase.

How Consulting With KPG Taxation Can Boost Your Retirement Income?

Taxation is something that requires careful and skilful attention. That’s what you get at KPG Taxation! 

Our qualified accountants can help develop a personalised tax strategy that considers your unique circumstances, retirement goals, and risk tolerance. 

They will also offer key insights on various aspects related to superannuation strategy, appropriate investment options and more!

Consulting with KPG Taxation

Focus On Growing Your Business, Leave The Accounting On Us!

  • Income Tax : File your taxes & get the best claims & returns.
  • Accountancy : Hire expert accountants to manage your transactions.
  • Bookkeeping : Let us handle your record books and expense reports.
  • Business Advisory : From company set-up to payroll, we handle it all.