{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

# Q10A - Problem Set 10 Solutions 1 Bill a retiree over 60...

This preview shows pages 1–2. Sign up to view the full content.

Problem Set 10 – Solutions 1. Bill, a retiree over 60 has \$1m of benefits in an allocated pension from a taxed source after 20/09/07. What income must he take? What tax is payable? Based on 2011/12 figures, Bill must take a minimum salary of at least 3% of \$1m (given his age) [\$30,000] as this is an account-based pension. As Bill is over 60, no income tax is payable. Age % account balance (2011/12) 55-64 3 65-74 3.75 75-79 4.5 80-84 5.25 85-89 6.75 90-94 8.25 95 or more 10.5 2. Tina, a retiree aged 63 has \$750,000 in an account based pension from an untaxed superannuation source. (i) What level of income must Tina take in order for it to qualify for concessional tax after 01/07/07? (i) The minimum amount is 3% of \$750,000 or \$22,500 in 2011/12. (ii) What tax is there on a pension of \$22,500? (ii) See the “untaxed source” table. Given her age, and assuming this is her only income, it is taxed at marginal rates with a 10% tax offset. The tax is \$2,475, and the tax offset (0.10×\$22,500 = \$2,250), so the tax payable is \$225 – with the low income tax offset (\$1,500 for taxable incomes up to \$30,000) this would reduce to nil. 3. A retiree aged 60 has \$520,000 in super from an untaxed source. Compare the following strategies in the first year of pension income: (i) Re-contribution strategy: The retiree takes a lump sum and pays lump sum tax, then elects to receive \$25,000 as a pension payment. (i) The tax on a lump sum from an untaxed source at 15% is \$78,000, which leaves \$442,000 after-tax. The individual is eligible to contribute the full \$442,000 as a non-concessional contribution back into super using the averaging provisions (the entire balance is now a 100% tax free element). At least 3% must be taken as an income stream (\$13,260). The preferred income is \$25,000 (representing approximately 5.65% of the first year capital balance of the pension) and is received tax free.

This preview has intentionally blurred sections. Sign up to view the full version.

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 4

Q10A - Problem Set 10 Solutions 1 Bill a retiree over 60...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online