What is a transition to retirement pension in Australia and how is it taxed?
A Transition to Retirement (TTR) pension in Australia allows those who have reached their preservation age to access their superannuation as an income stream while still working, potentially boosting their super balance or reducing tax through salary sacrifice.
Was this helpful?
9 readers found this helpful
9 readers found this helpful
How it works in practice
What is a Transition to Retirement (TTR) Pension?
A Transition to Retirement (TTR) pension is a financial strategy designed for individuals who have reached their superannuation preservation age but are not yet fully retired. It allows you to access a portion of your superannuation as a regular income stream while you continue to work, either full-time or part-time. The primary goal is often to use this income to supplement a reduced working income or to implement a tax-effective salary sacrifice strategy.
How TTR Pensions are Taxed
The tax treatment of a TTR pension depends on your age. If you are under 60, the taxable portion of your income stream will be taxed at your marginal tax rate, with a 15% tax offset. If you are 60 or over, your income stream payments are generally tax-free. However, earnings within the super fund supporting the TTR pension are taxed at up to 15%. This changed from 1 July 2017, when these earnings were previously tax-free for TTR accounts.
Important exceptions
Eligibility is strictly tied to reaching your superannuation preservation age, which varies between 55 and 60 depending on your date of birth.
There are minimum and maximum annual withdrawal limits (4% to 10% of your account balance).
The tax benefits significantly reduced from 1 July 2017, when earnings within a TTR pension account became taxed at 15%. This means the strategy is now primarily for income smoothing rather than solely tax reduction for fund earnings.
What you should do now
-
Determine if you have reached your superannuation preservation age, as this is the primary eligibility criterion for a TTR pension.
-
Research the minimum (4%) and maximum (10%) annual withdrawal limits to understand how much income you can draw from your super.
-
Seek professional financial advice to assess if a TTR strategy aligns with your retirement goals and current tax situation.
-
Contact your superannuation fund to understand their specific TTR pension product offerings and application process.
-
Regularly review your TTR strategy with your financial advisor, especially as tax laws and your personal circumstances may change.
Expert Notes
No expert notes have been added to this question yet.
People also asked
Explore highly relevant questions and get instant verified short answers.