⚠️ IMPORTANT DISCLAIMER: This guide provides general educational information only and does not constitute financial advice. TTR pension suitability depends on individual circumstances, financial goals, and tax position. Always consult a licensed financial adviser before starting a TTR pension or changing your super arrangements. We are not licensed to provide financial product advice under the Corporations Act 2001.
Transition to Retirement (TTR) allows access to super while still working once you reach preservation age. This arrangement has specific tax treatment and withdrawal limits under superannuation legislation.
This educational guide explains general TTR eligibility requirements, tax treatment, withdrawal rules, and common approaches people consider. All TTR decisions should be made with professional financial advice specific to your circumstances.
What is Transition to Retirement?
A TTR pension (also called Transition to Retirement Income Stream or TRIS) is an account-based pension that lets you:
- ✅ Access your super while continuing to work
- ✅ Reduce working hours without reducing income
- ✅ Boost super through salary sacrifice + pension drawdown strategy
- ✅ Test retirement lifestyle before fully retiring
🎯 Classic TTR Strategy: Draw a pension from your super, then salary sacrifice the same amount back into super. Your take-home pay stays the same, but you save significant tax because super earnings are taxed at 15% instead of your marginal rate.
Eligibility Requirements
Preservation Age
You can start a TTR pension once you reach your preservation age:
| Date of Birth | Preservation Age |
|---|---|
| Before 1 July 1960 | 55 years |
| 1 July 1960 - 30 June 1961 | 56 years |
| 1 July 1961 - 30 June 1962 | 57 years |
| 1 July 1962 - 30 June 1963 | 58 years |
| 1 July 1963 - 30 June 1964 | 59 years |
| From 1 July 1964 | 60 years |
Other Requirements
- Must have super available (not already fully withdrawn)
- Can start TTR even if still working full-time
- Don't need employer approval (but need cooperation for salary sacrifice)
- Can be in accumulation or pension phase super
TTR Pension Rules and Restrictions
Withdrawal Limits
Annual Withdrawal Range:
• Minimum: 4% of account balance per year (or pro-rata if started mid-year)
• Maximum: 10% of account balance per year
These limits apply while you're in transition phase (working).
• Minimum: 4% of account balance per year (or pro-rata if started mid-year)
• Maximum: 10% of account balance per year
These limits apply while you're in transition phase (working).
Example: TTR balance of $500,000:
- Minimum withdrawal: $20,000/year ($1,667/month)
- Maximum withdrawal: $50,000/year ($4,167/month)
Tax on Earnings (Accumulation Phase Tax)
Key difference from retirement phase pensions:
- ❌ TTR earnings taxed at 15% (same as accumulation phase)
- ✅ Regular retirement pension: 0% tax on earnings
This changed in 2017. Previously, TTR pensions had 0% tax on earnings. Now they're taxed at 15% until you fully retire or reach age 65.
When TTR Becomes Full Retirement Pension
Your TTR automatically converts to a retirement phase pension (0% tax on earnings) when you:
- ✅ Reach age 65, OR
- ✅ Permanently retire, OR
- ✅ Meet a condition of release (terminal illness, permanent incapacity)
TTR Tax Benefits Explained
Tax on Pension Payments
| Your Age | Tax on TTR Payments | Tax-Free Component |
|---|---|---|
| Under 60 | Taxable at marginal rate (with 15% tax offset) | Tax-free |
| 60 or over | 100% tax-free | Tax-free |
💡 Major Benefit at Age 60+: Once you turn 60, TTR pension payments are completely tax-free. Combined with salary sacrifice (taxed at 15%), this creates powerful tax savings.
Classic TTR Strategy (The "Boost" Strategy)
The most common TTR strategy is to maintain your current take-home pay while boosting super contributions through tax savings.
How It Works:
Step 1: Start TTR pension and withdraw (e.g., $20,000/year)
Step 2: Salary sacrifice the same amount ($20,000/year)
Step 3: Your take-home pay stays the same
Step 4: You save tax on the difference between your marginal rate and 15%
Step 2: Salary sacrifice the same amount ($20,000/year)
Step 3: Your take-home pay stays the same
Step 4: You save tax on the difference between your marginal rate and 15%
Detailed Example: Sarah (age 61)
- Salary: $100,000/year
- Super balance: $600,000
- Current tax: $22,967/year (marginal rate 32.5%)
Without TTR:
- Gross income: $100,000
- Tax paid: $22,967
- Take-home: $77,033
- Super from employer SG: $11,500
With TTR Strategy:
- Gross income: $100,000
- Salary sacrifice: $20,000
- Taxable income: $80,000
- Tax paid: $16,467
- TTR pension (age 60+, tax-free): $20,000
- Take-home: $83,533 (vs $77,033)
- Employer SG + salary sacrifice into super: $31,500
- Tax on contributions (15%): $3,000
✅ Result:
• Extra take-home: $6,500/year
• Extra into super: $20,000/year
• Tax saved: $6,500/year
• Net benefit: Significantly larger super balance at retirement
• Extra take-home: $6,500/year
• Extra into super: $20,000/year
• Tax saved: $6,500/year
• Net benefit: Significantly larger super balance at retirement
Common TTR Approaches (Educational Information Only)
⚠️ NOT RECOMMENDATIONS: The following describes general approaches some people have used with TTR pensions. This is educational information only, not advice. Every person's circumstances are unique. Do not implement any strategy without consulting a licensed financial adviser.
Approach 1: Contribution Boost Arrangement
General Description: Some people ages 60-67 who are still working explore using TTR with salary sacrifice.
General Concept:
- Withdraw TTR pension (subject to 4-10% limits)
- Salary sacrifice a similar amount (subject to concessional cap)
- May maintain similar take-home pay while altering tax position
- Tax differential between marginal rate and 15% contribution tax
Consideration: This approach has complex tax implications and requires professional advice to determine suitability.
Approach 2: Income Supplement While Reducing Hours
General Description: Some people use TTR to maintain income while transitioning to part-time work.
General Concept:
- Reduce working hours (e.g., from full-time to part-time)
- Start TTR pension to supplement reduced salary
- May maintain lifestyle during gradual retirement transition
- Salary sacrifice considerations depend on remaining income
Consideration: Impact on super balance and long-term retirement funding requires professional assessment.
Approach 3: Cash Flow Management
General Description: Some people with reduced income use TTR for cash flow purposes.
General Concept:
- Draw TTR pension to supplement current income
- Focus on cash flow rather than contribution strategies
- May not involve salary sacrifice due to income constraints
Consideration: Must balance current cash flow needs with long-term retirement adequacy.
Factors That May Affect TTR Suitability
TTR may not be suitable for everyone. Factors some advisers consider include:
- Lower income levels may reduce tax benefit magnitude
- Smaller super balances may be affected by withdrawal limits and longevity risk
- Those already maximizing concessional contributions may see limited additional benefit
- Need to preserve super balance for retirement adequacy
- Proximity to full retirement (short time horizon considerations)
Important: Whether TTR is appropriate for you requires comprehensive financial advice. Do not start a TTR pension without consulting a licensed adviser.
⚠️ Important: Since 2017, TTR pensions are taxed at 15% on earnings (not 0%). This reduces the benefit significantly. The strategy still works at age 60+ but is less powerful than pre-2017.
TTR vs Waiting Until Full Retirement
| Factor | TTR (Age 60-64) | Wait Until 65+ |
|---|---|---|
| Access to super | Yes (4-10% range) | Yes (unlimited) |
| Tax on payments | 0% if age 60+ | 0% if age 60+ |
| Tax on earnings in super | 15% (accumulation rate) | 0% (retirement phase) |
| Can still work? | Yes (any hours) | Yes, but changes to full retirement pension |
| Salary sacrifice benefit | High (if 60+) | N/A (usually not working) |
How to Set Up a TTR Pension
- Check eligibility: Confirm you've reached preservation age
- Contact super fund: Request TTR pension application
- Decide transfer amount: How much to move from accumulation to pension
- Complete application: Usually 10-15 pages of paperwork
- Choose pension frequency: Monthly, quarterly, or annual payments
- Set up salary sacrifice: Arrange with employer simultaneously
- Monitor annually: Review strategy each year before June 30
⚠️ Cannot Reverse: Once you transfer super to pension phase, you generally cannot put it back into accumulation phase without meeting a condition of release or re-contributing (using contribution caps).
Common TTR Mistakes
Mistake #1: Withdrawing More Than You Salary Sacrifice
If you draw $30k from TTR but only salary sacrifice $10k, your super balance decreases. The strategy only boosts super if contributions ≥ withdrawals.
Mistake #2: Not Adjusting for Investment Returns
Your 4-10% withdrawal limits are based on account balance at start of financial year. If your balance grows, you can (and should) increase withdrawals proportionally.
Mistake #3: Exceeding Concessional Cap
Employer SG + salary sacrifice must stay under $30,000/year combined. Track carefully!
Example: Salary $150k → SG = $17,250 → Max salary sacrifice = $12,750
Mistake #4: Forgetting Division 293 Tax
If income + concessional contributions > $250,000, you pay extra 15% tax on contributions (30% total). This reduces but doesn't eliminate TTR benefits.
TTR Strategy After Age 65
Once you turn 65, your TTR pension automatically converts to a full retirement pension:
- ✅ No more 10% withdrawal limit (unlimited access)
- ✅ Earnings taxed at 0% (not 15%)
- ✅ Can continue working if desired
- ✅ Minimum withdrawal still applies (4% at age 60-64, 5% at 65-74)
💰 At 65+: The tax benefits improve dramatically. Earnings in pension phase drop from 15% to 0%, making super even more attractive than TTR phase.
Hypothetical Example (Illustrative Only - Not Advice)
⚠️ EXAMPLE ONLY: The following is a hypothetical scenario for educational purposes only. This is not advice and should not be replicated without professional guidance tailored to your specific situation.
Hypothetical Scenario - Person Age 62:
- Salary: $120,000/year
- Super balance: $800,000
- Preservation age: 60 (reached 2 years ago)
- Plans to retire: Age 67
Strategy Implemented:
- Started TTR pension: Transferred $800k to pension phase
- Annual withdrawal: $32,000/year (4% minimum)
- Salary sacrifice: $18,400/year (max out $30k with SG)
- Net effect: Withdraw $32k, contribute back $18.4k
Financial Impact:
- Tax on salary sacrifice (15%): $2,760
- Tax saved on income (32.5%): $5,980
- Net tax saving: $3,220/year
- Super balance change: -$32k + $18.4k = -$13.6k/year (drawdown)
- Take-home pay: +$13,620/year (after-tax extra income)
Over 5 years until age 67:
- Total tax saved: ~$16,100
- Extra take-home: ~$68,100
- Super balance at 67: ~$720,000 (vs ~$800,000 if untouched)
- Outcome: Improved lifestyle in final working years while maintaining substantial retirement savings
Factors Advisers May Consider in TTR Assessment
📋 General Factors Often Assessed:
- Age and proximity to full retirement
- Current employment status and income level
- Super balance and adequacy for retirement
- Cash flow needs and take-home pay requirements
- Goals regarding work hours and lifestyle
- Other retirement income sources (Age Pension, investments)
- Tax position and marginal tax rate
Considerations That May Affect Suitability:
- Age under 60 may affect tax treatment of payments
- Short time horizons may reduce benefit accumulation
- Lower super balances may be affected by withdrawal requirements
- Need to maintain adequate retirement funding
Important: TTR suitability is highly individual. Only a licensed financial adviser who understands your complete financial situation can determine if TTR is appropriate for you.
TTR vs Other Strategies
TTR vs Waiting Until Full Retirement
TTR Advantage: Access super earlier, tax savings through salary sacrifice
Wait Advantage: 0% tax on earnings (vs 15%), super compounds tax-free longer
TTR vs Working Longer
TTR Advantage: Reduce hours now, improved lifestyle
Work Longer: Higher super balance, more Age Pension deferral, continued income
TTR vs Lump Sum Withdrawal
TTR Advantage: Controlled regular income, tax benefits, keeps super invested
Lump Sum: Immediate full access (age 65+), pay off debts, major purchases
Frequently Asked Questions
Can I stop my TTR pension and put the money back?
No. Once withdrawn from super, you can only put it back through new contributions (subject to contribution caps).
What happens to my TTR if I lose my job?
TTR continues unaffected. However, you can't salary sacrifice without employment income, so you lose the main tax benefit.
Can I have TTR with multiple super funds?
Yes. You can start TTR pensions with multiple funds, but the 4-10% limits apply to each pension separately.
Does TTR affect my Age Pension entitlement?
Yes. Super in pension phase counts toward Age Pension assets test and income test (via deeming). However, the tax benefits may still make TTR worthwhile even if it reduces your future Age Pension slightly.
Can I change my TTR pension amount?
Yes. You can vary your pension payment amount at any time, as long as it stays between 4-10% annually.
🧮 Model Your TTR Strategy
Our Advanced Calculator lets you model TTR pension scenarios with salary sacrifice and shows exactly how much tax you'll save.
Try Our Calculator →Summary
Transition to Retirement is a powerful strategy for Australians aged 60-67 who are still working:
- ✅ Access super early: From preservation age (55-60)
- ✅ Withdrawals 4-10%: Of account balance annually
- ✅ Tax-free at 60+: Pension payments completely tax-free
- ✅ Boost super: Combine with salary sacrifice for tax savings
- ✅ Earnings taxed 15%: Until you fully retire or reach 65
- ⚠️ Changed in 2017: Less beneficial than before, but still worthwhile
TTR arrangements have complex tax, superannuation, and long-term retirement implications. Our calculator can model general scenarios for educational purposes, but all TTR decisions must be made with advice from a licensed financial adviser who understands your specific circumstances.