In this guide
If you’re on the final stretch to retirement and would love to start winding back your working hours but don’t think you can afford it, listen up.
Ditto if you plan to keep working full time for a while longer and want to boost your super but haven’t got the ready cash to make extra contributions.
Help could be at hand in both cases in the form of a superannuation transition-to-retirement pension or income stream (TTR). This strategy can be used to either:
- Work fewer hours and use a TTR pension from your super to supplement your income
- Salary sacrifice some of your salary into super to save tax and withdraw income from your super using a TTR pension to replace some or all the lost income, even if you continue working full time.
Good to know
Transition-to-retirement pensions go by other acronyms. We’ve chosen TTR but you may also see them abbreviated to TRIS (transition-to-retirement income stream).
The examples and tax details we discuss here reflect the position of taxed super funds. If you are a member of one of the much more uncommon untaxed funds you can read more about the tax on income streams in our tax guides to accessing super over age 60 and under age 60.
Am I eligible?
If you’ve turned 60 and are still working, you’re good to go.
If you’re in a defined benefit fund, you may not be able to commence a TTR or you may only be able to use a portion of your benefit. Only about 10% of Australians are members of defined benefit funds, which tend to be public sector or older corporate funds. If this is you, talk to your fund to find out your options.
What are the advantages?
The taxation of TTR pensions has always been one of their key attractions. While they are still tax effective for many people, they lost a little of their shine after a change to the tax rules a few years back.
Good to know
From 1 July 2017, investment earnings in a TTR pension attract a tax rate of 15% just like super accumulation accounts. Prior to this date, no tax was applied.
What has not changed is the taxation of withdrawals – TTR pension payments are tax free.
Depending on your personal circumstances TTR pensions still have much to offer. They can help you:
- Ease into retirement by reducing your working hours without cutting your income or compromising your lifestyle
- Continue to make contributions to your super accumulation account (or have them made by your employer)
- Receive tax-free pension payments
- Grow your super and save tax via salary sacrifice or personal contributions for which you claim a tax deduction, even if you continue working full time.
Learn more about transition-to-retirement strategies.
When you salary sacrifice or make a voluntary concessional contribution into super, your contributions are taxed at the concessional rate of 15% up to an annual cap of $30,000. (Prior to 1 July 2024 the concessional cap was $27,500). If your total super balance was below $500,000 on the prior 30 June, you can also contribute more than the standard cap by using carry forward. This can be a valuable strategy if your marginal tax rate is higher than 15%, and your super balance could do with a boost.
Example
Jill is 60 and earns $100,000 a year, which puts her in the 32% tax bracket (including the Medicare Levy). She has $300,000 in super and wants to keep working full time until at least age 65 but wishes she could do more to increase her retirement savings. As she doesn’t have the spare cash to make extra contributions, she decides to take advantage of a TTR strategy.
Jill can withdraw a pension of up to $30,000 in the current financial year – 10% of her balance. She decides to withdraw this amount and salary sacrifice back into her accumulation account to maintain the same take-home pay.
Jill has unused concessional cap space of $82,500 from prior years so she can exceed the standard annual $30,000 concessional cap without generating excess contributions that are taxed at a higher rate.
To reduce her take-home pay from work by $30,000 per year (and replace it with $30,000 withdrawn tax free from super), Jill salary sacrifices $44,350 in 2025-26. After 15% contribution tax is deducted, this results in $37,697.50 being added to her super account.
The bottom line is an overall tax saving and a net boost to her retirement savings of around $7,700 for the year. This is Jill’s net additional contribution minus the pension income she has withdrawn.
After her employer’s contributions are added, Jill has used up $29,350 of her unused concessional cap space from prior years. If her balance remains under $500,000 on 30 June 2026, she can continue using her remaining available carry-forward amounts in the following financial year.
Disclaimer: These are ballpark figures. Everyone’s TTR calculation will be different, depending on their income, super balance, eligibility to use carry forward and marginal tax rate. To model your own situation you may like to try a transition-to-retirement calculator.
What are the drawbacks?
Plan your retirement (without a financial adviser)
- Step-by-step guides help you plan and take action
- Simple changes can make a big difference to your super balance
- Calculators, case studies and Q&As give you greater confidence
- Make sure your super is performing and lasts longer
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