Transition-to-retirement pension (case studies): How does a TRIP work?

SUPER ALERT! On 3 May 2016 (in the 2016 Federal Budget), the Coalition government announced that, from 1 July 2017, it intends to remove the tax exemption on pension fund earnings financing a transition-to-retirement pension (TRIP). This change, confirmed after the Coalition won the July 2016 Federal Election and subject to legislation, will apply to TRIPs in place before July 2017 as well as TRIPs commenced on or after 1 July 2017.

A transition-to-retirement pension (what we call a TRIP) enables any Australian who has reached their preservation age (at least age 55, and moved to at least 56 years or older since 1 July 2015, depending on your date of birth), to access his or her superannuation benefits in the form of a pension without retiring or satisfying an additional condition of release.

Using three case studies, this article illustrates how a TRIP can operate in practice.

The basic feature of a TRIP is that you don’t have to retire to withdraw your super benefits. You can work part-time or full-time or even casually. TRIPs are subject to five main conditions:

  • You must have reached your preservation age: anyone born before 1 July 1960 has a preservation age of 55 years. Anyone born after 30 June 1960 has a preservation age of at least 56 years, and anyone born after 30 June 1961 has a preservation age of at least 57 years, and may be up to 60 years, depending on your date of birth. Anyone born after 30 June 1964 has a preservation age of 60 years. For more information on your preservation age, see SuperGuide article Accessing super: What is my preservation age?
  • You can withdraw no more than 10% of the value of your pension account balance each financial year
  • You must withdraw, each year, a minimum of 4% of the value of your pension account balance, as at 1 July.
  • Generally, you cannot convert your TRIP to a lump sum unless you retire, or turn 65, or satisfy some other condition of release. The one exception to the ‘no lump sum’ rule is when the fund member has some unrestricted non-preserved benefits in the TRIP account. You may have these types of benefits if you were a fund member before July 1999. If so, these benefits are not preserved and can be accessed as a lump sum from the TRIP account, without breaking the TRIP rules.
  • If you run an SMSF, your pension account must be separate from the super account that accepts contributions.

I explain many more key features of a TRIP in the SuperGuide article TRIPS: 10 interesting facts about transition to retirement pensions.

Why bother with a TRIP, really?

Some individuals may start a transition-to-retirement pension (TRIP) simply because they need the extra income to survive, and to cover everyday expenses (see case study 1, later in article).

Starting a TRIP can provide flexibility for individuals wanting to gradually move into retirement by reducing working hours (see case study 2, later in article).

The major selling point however for many individuals considering the decision to start a TRIP, is that while you’re still working, you can access the tax advantages associated with superannuation pensions (income streams) while redirecting extra contributions to your super account (see case study 3, later in the article). Note that from 1 July 2017, the government is removing the tax exemption on pension asset earnings for TRIPs (subject to legislation).

Tax advantages associated with superannuation pensions include:

  • For under-60s: Tax-exempt investments earnings on assets financing the super pension (although this tax exemption will be removed from TRIPs from 1 July 2017, subject to legislation). You receive a 15% pension rebate (offset) for income tax on pension payments for under-60s. If you’re between the ages of 56 and 60 when you receive super benefits from your TRIP, you receive a 15% pension offset on the taxable component of the pension payments. The tax-free component of any pension payment is always tax-free, regardless of age
  • For over-60s: Tax-exempt investments earnings on assets financing the super pension (although this tax exemption will be removed from TRIPs from 1 July 2017, subject to legislation), and tax-free pension income for over-60s.

By taking advantage of the tax concessions associated with TRIPs, individuals are potentially able to boost their super accounts by redirecting the tax savings to their super account (see case study 3 later in the article). For example, one of the more popular TRIP strategies is to salary sacrifice into your super fund up to your concessional (before-tax) contributions cap (after also allowing for your employer’s Superannuation Guarantee payments), and replace the salary income with tax-free pension payments (if over 60), or concessionally taxed pension payments (if under 60).

Important: The special $35,000 cap applies to over-50s (more specifically, to anyone who is aged 49 years or over on 30 June 2016, for the 2016/2017 year).The general concessional contributions cap is $30,000 for under-50s (more specifically for those aged 48 years or younger on 30 June 2016 for the 2016/2017 year).

If you’re considering taking advantage of the transition-to-retirement pension/salary sacrifice strategy, or considering reviewing an existing strategy, then seek taxation advice on the merits of such a strategy for your personal circumstances, especially the implications post-30 June 2017. I explain this strategy, using case studies, in the updated article below.

Note: SuperGuide regularly updates the case studies below, to reflect changes to the concessional contributions caps, and changes to the tax rates. The case studies are mere examples, and you will need to verify the effect of a TRIP on your personal circumstances with your accountant, your super fund or your financial adviser.

Depending on your super fund, you can start a TRIP with as little as $20,000, although you need to be mindful that drawing down on your super benefits before you retire can affect your lifestyle later on when you do finally retire. As I often say, just because you can, doesn’t mean you should. You will need to weigh your current financial needs against your needs for the future. Whether a TRIP, and related strategies, is right for you or not will also depend on many factors, including the level of your income, your super savings, and general financial needs and situation.

The three case studies below (applicable for the 2016/2017 year), illustrate the three most popular reasons for starting a transition-to-retirement pension, that is, the pension type that I call a TRIP.

Case study 1: Start a TRIP to access extra income

Facts: Marianne is 60 years of age and her salary is $72,000 per year. Marianne intends to continue working full-time, but she wants to increase her monthly income by accessing some of her super benefits via a transition-to-retirement pension. Marianne has $250,000 in her superannuation account. She elects to receive the maximum yearly pension payment of 10 per cent of her account balance, that is, $25,000, payable monthly, over the 12-month period from July through to June. Her income increases dramatically, but she pays no extra tax on the additional income because it is sourced from tax-free superannuation pension payments. The size of her overall super and pension account balances will be affected however, due to the pension payments.

Income working full-time –


Income working full-time –

WITH TRIP income

Employer salary$72,000$72,000
Assessable Income$72,000$72,000
Transition to Retirement IncomeNil$25,000
Gross income$72,000$97,000
Taxable Income$72,000$72,000*
Tax (incl Medicare levy)$16,387$16,387
Net Income $55,613$80,613

* Marianne is aged 60. Her pension payment income from a transition-to-retirement pension is tax free and non-assessable. Tax rates and Medicare levy used in the table above are applicable for the 2016/2017 year.

Case study 2: Reduce work hours but maintain same lifestyle/income

Facts: Georgia is 55. She earns $73,000 per year, which leaves her with $56,328 after income tax and Medicare levy. Georgia needs all of this income to cover her living expenses. She currently works 5 days a week, but intends to reduce her hours to 4 days a week.

If Georgia works 4 days, her income would be reduced to $58,400, and her after-tax income (and after Medicare levy) would be cut by $9,499 per year to $46,829 (see Table 2.1 below). If, however, she starts a TRIP with her $120,000 superannuation account balance, and takes the maximum $12,000 in the first year, then her after-tax income will be $56,365 (see Table 2.2 below), virtually the same as her full-time after-tax income.

She can work 4 days but maintain the same income that she enjoyed as a full-time worker.

Table 2.1: Georgia works 4 days
Georgia’s gross income (salary) for four days work (4/5 of $73,000)$58,400
Deduct: Income tax (incl. Medicare Levy)-$11,695
Add: Low Income Tax Offset+$124
Total income tax (incl ML)$11,571
Georgia’s net income (after-tax salary) for four days work$46,829*

*This level of income leaves Georgia with an income shortfall of $9,499 per year. Tax rates and Medicare levy used in the table above are applicable for the 2016/2017 year.

Table 2.2: Georgia works 4 days PLUS starts a TRIP*
Georgia’s net income (salary) for four days work (4/5 of $73,000)$58,400
Add: Income from TRIP+$12,000
Total income$70,400
Deduct: Income tax (incl. Medicare)-$15,835
Add: Low Income Tax Offset$0
Add: 15% Rebate applied to TRIP+$1,800
Georgia’s net income (after-tax salary) for four days work – including the income from her TRIP$56,365

*If Georgia was 60 years or older, she would pay no tax on the income from her TRIP, further increasing the tax advantages of taking a TRIP by around $2,000. Tax rates and Medicare levy used in the table above are applicable for the 2016/2017 year.

Case study 3: Boost your super while saving tax

Note: The special $35,000 cap for over-50s is $35,000 (more specifically, to anyone who is aged 49 years or over on 30 June 2016, for the 2016/2017 year). If you’re considering such a strategy or considering reviewing an existing strategy, then seek taxation advice on the merits of such a strategy for your personal circumstances.

Facts: Martin is aged 58 and earns a salary of $80,000 each year plus 9.5% Superannuation Guarantee contributions. Martin wants to continue to receive his current net income while also maximising his super contributions.

Martin currently has $200,000 in super, which is split into $100,000 tax-free component and $100,000 taxable component.

Martin salary sacrifices $25,000 per year from his salary into his super account (in addition to his employer’s 9.5% SG contributions of $7,600), and stays within his 2016/2017 concessional cap of $35,000. Martin wants to receive a similar net income, so he starts a transition-to-retirement pension (TRIP) and draws $10,000 per year – 5% of his account balance, which is less than the 10% maximum withdrawal permitted each year, and more than the 4% minimum withdrawal required each year.

The table below illustrates that by using the TRIP and salary sacrificing strategy, Martin has taken a slight drop in income, while boosting his super account by an additional $11,250 (after contributions tax) each year due to the tax savings from taking a TRIP, and salary sacrificing. If Martin continues this strategy after age 60, the amount withdrawn from his super is 100% tax-free. Note that from 1 July 2017, the government will be abolishing the tax exemption on earnings from TRIP assets (subject to legislation).

Outcome: In his circumstances, Martin will have to decide whether the strategy (and a drop in current income), is worth the additional super contributions and potential associated costs of having a pension account as well as a superannuation (accumulation) account. He could also choose to withdraw a greater amount as a TRIP (up to 10% of the account balance), but in his specific circumstances, if he does this, the growth in his super savings from salary sacrificing will be smaller.

Outcome if Martin was 60 years or over: If Martin was aged 60 years or over, the tax benefits of a TRIP/salary sacrificing strategy are clearly more enticing due to the replacement of taxable income with tax-free pension benefit payments. Note that from 1 July 2017, the government will be abolishing the tax exemption on earnings from TRIP assets (subject to legislation), although benefit payments for over-60s will continue to be tax-free.

Tip: The higher the salary you earn, the more likely that the TRIP/salary sacrifice strategy will deliver you tax advantages.

 Using TRIP/Salary sacrifice strategy
MartinCurrent positionUnder 60On or after age 60*
Martin’s Gross Income (Salary)$80,000$80,000$80,000
Deduct: Salary Sacrifice into super$0$25,000$25,000
Add: Super pension drawn$0$10,000$10,000
Deduct: Non-assessable Super Pension (tax-free component)$0$5,000$10,000
Gross income$80,000$65,000$65,000
Taxable income$80,000$60,000$55,000
Deduct: Income Tax (incl. Medicare Levy) and less low income tax offset in Columns 3 & 4$19,147$12,147$10,422
Add: 15% Pension Rebate$0$750$0
Martin’s Net income (including pension income)$60,853$53,603$54,578
Martin’s super savings  
9.5% SG contributions net of 15% contributions tax$6,460$6,460$6,460
Salary sacrificed contributions$0$25,000$25,000
Less: Super contributions tax paid on Sal Sacrifice$0$3,750$3,750
Gain in Super Balance each year (excluding investment earnings) due to TRIP strategy$0$11,250$11,250
Total taxes paid (including income tax & ML, contributions tax and less pension rebate)$19,147$14,947$14,172

*Salary Sacrifice and the 9.5% Superannuation Guarantee contributions are taxed at 15 per cent. Withdrawals and pension payments after age 60 are tax free. ‘Income tax’ includes Low Income Tax Offset, where applicable. Tax rates and Medicare levy used in the table above are applicable for the 2016/2017 year.


  1. Ramakant Duggal says:

    Hi Trish,

    I did some ‘googling’ and found this clear answer to my question of access to super at 55 over.

    I have some questions. I am living overseas since the year 2000 – Singapore, Dubai and Bangkok. I am still working so can’t claim retirement, hence TRIP seems to be a good thing.

    My Q’s are :

    1. I realise the posts in here are from 2011, hope it is not too stale to post these Q’s. Is TRIP still a legit way to access super after 55 ?

    2. How do I go about applying for TRIP ? Can I do it while overseas or does it require a trip home ?

    3. Are there any consultants/advisors who might get teh paperwork rolling for me ?

    4. How do I know which is the “preserved” portion and which part can I withdraw ?

    The total amount in my super is just below 100k. It is not going to go far towards retirement if and when I return to Oz (which is very doubtful in my case).

    Much appreciate any answers.



  2. TRPI?

    Calculation how?

  3. Hi Trish
    I am turning 55 with $380,000 currently in super and my bank has suggested we take the 10% per annum option and use it towards paying off our $160,000 mortgage. Do you have any thoughts on this?

  4. Hi,

    I should be most grateful if your would advise me on the following:

    I am 62 years old and my wife is 60. I retired after age 60 and withdrew all my money as a lump sum from the Superannuation to buy a second house in 2010. We bought the first house in 2000 and we are still having that house. My question is: do I (we) need to establish a self-management super fund (SMSF)? If so, what are the benefits of this SMSF to us as my wife and I are over 60? If we sell one or both of the houses, do we have to pay tax if we have no SMSF?
    P.S currently we pay no mortgage on both houses.


  5. Peter Hughes says:

    Hi Trish,

    In your third example, the pension rebate allowed is $1,500. Should that be $750 given that only half of the pension is taxable?


    Peter Hughes

  6. Trish, I have a growing distrust that super will be further impinged upon by government in the future. My aim is to extract my super as soon as possible. What is the most effective way of doing this. I am 55. I earn $60k per year and have $150K in super. Can I use TRIP to extract 10% per year without making a member contribution?

  7. Shana Lepol says:


    I have a Superannuation balance of 400,000 and am turning 55 next year. I want to retire abroad and take a pension will I be liable to pay tax in Australia or in my country of residence also what happens to the 15% offset if no tax is to be paid in Australia


  8. John Kirkbride says:

    Hi Trish,
    I love your work it, is so informative.
    I have a question relating to contribution caps and TRIP. My current balance is over $500k in a SMSF and in which a TRIP can be set up if I wish. As I understand it setting up a TRIP requires funds to be segregated – part into the TRIP and part remaining in accumulation phase. I am 57 years old and propose to continue full time work however my current contributions are already in the low $20k’s with the limit soon to become $25k for balances over $500k.
    My question is – does the contribution cap relate to only the balance remaining in the accumulation account or to the total SMSF balance??

    Thank you

  9. i may missed something but all the explanations of TRIP seem to relate to an emloyed person , ie PAYE.
    Could you please explain how a TRIP would work for a self-employed person.
    Our situation is we are both between 55 and 60 , and own a business , in a trust structure , in which we both work.
    At the end of each financial year we contibute a lump sum to our SMSF.
    Would we benefit from a TRIP?

  10. Hi
    I am about to turn 55.
    My wife and I have a SMSF with substantial balances each (invested in a “balanced” way).
    While I am not earning any personal exertion income, I am in the top tax bracket, and do not need additional cash to live on.
    I am about to contribute the maximum $50k for the 2012 tax year.
    Question : Will it be worth my while transitioning any part of my super into pension mode? … and if so, how much?

  11. Dean Mohammed says:

    I was very impressed with the your case studies.I will turn 55 in Jan 2012 .Will I be able to draw 10% pension from my super account while I am still fulltime employed ?.My balance is $320K with gross income $75K.
    Thank you

  12. Mike Fawcett says:

    I have a SMSF, I’m aged 55 and I’m considering living overseas (New Zealand) temporarily, for up to 2 years.

    1) Are the earnings in my super fund still taxed at 15% while I am overseas?

    2) Can I make contributions while I am overseas?

    3) Is it OK for the sole director of the trustee company of a SMSF to live overseas?

  13. G’day Trish,

    I’m a little confused on the mature age worker’s offset because different sources provide conflicting info. According to the ATO and CCH books, super pension income is not “income from working” and the CCH “Master Financial Planning Guide 2010/11” on page 53 says the offset is worked out on “net income from working”.

    That same CCH book has an example on page 854, as your example does above from Health Super, that seems to take the TRIP income into account when calculating the offset. So, unless I’m totally lost, CCH is contradicting itself.

    I must be missing something, can you please confirm if a super income stream is included when calculating this offset? Thanks.

    • Hi Adam
      Thanks for your comment. Generally speaking, we cannot comment on the non-super tax rules, such as the mature age workers offset (MAWO). What we can say is that, according to the ATO website, the MAWO is linked to net income from working rather than TRIP income. The tables presented in the article above don’t provide the background calculations, but the MAWO is based on net income from working, and not based on TRIP income. Note however that ‘reportable employer super contributions’ also count towards ‘net income from working’.

      Quoting directly from the ATO website: “to be eligible for the mature age worker tax offset in 2009–10, you must:

      * be an Australian resident for tax purposes
      * be aged 55 years or more at the end of the income year, and
      * have received net income from working (within certain limits).

      Again quoting directly from the ATO website:

      “Net income from working includes:

      the total of amounts of assessable income that are mainly a reward for your personal effort or skills

      less any related deductions and income from a business that you carry on

      less any related deductions.

      Reportable employer super contributions are now included when calculating your net income. Reportable employer super contributions are salary sacrificed super contributions or other contributions your employer makes to a super fund on your behalf that are additional to the minimum contributions they must make.

      Your net income from working is used to calculate the amount of mature age worker tax offset that you are entitled to.

      Income from working includes:

      * salary and wages
      * allowances, earnings, tips and commissions
      * regular periodic payments under a sickness and accident or insurance policy or worker’s compensation scheme
      * business income from a business that you carry on
      * personal services income (PSI)
      * foreign employment income
      * assessable farm management deposit withdrawal amounts
      * reportable fringe benefits
      * reportable employer super contributions
      * income derived by a professional sports person or entertainer from the exercise of personal expertise or skill
      * other income from working such as commissions, bonuses and fees paid to directors or office holders
      * income derived by consultants for the exercise of personal expertise.

      Income from working does not include:

      * social security benefits – payments received from Centrelink or the Department of Veterans’ Affairs
      * interest income
      * dividends and commodity gains
      * trust distributions
      * capital gains
      * superannuation pensions or annuities
      * lump sum payments received on retirement or termination of employment in lieu of long service leave and annual leave
      * employment termination payments
      * rental income
      * royalties or amounts received from the assignment of intellectual property.”

      [end of extract from ATO website]
      I trust this assists you with your question.

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