Background

A transition to Retirement is a type of pension that enables you to access part of your super with periodic payments. If you’re still working and receiving an income from your employer or business you are still able to start a transition to retirement income stream.
To access your super this way, you must have reached your preservation age, which will be between 55 and 60, depending on when you were born.

Please use the table below to work out what your preservation age is.
Date of birth Preservation age

Before 1 July 1960                     55
1 July 1960 – 30 June 1961     56
1 July 1961 – 30 June 1962      57
1 July 1962 – 30 June 1963     58
1 July 1963 – 30 June 1964     59
1 July 1964 and onwards         60

 

Even if you’re nearing retirement age you mightn’t be looking to leave the workforce just yet. You might want to save more money, or perhaps you are still enjoying work.
Whatever your reason, having access to a transition to retirement (TTR) income stream can provide greater financial flexibility, as you can periodically withdraw money from your super while continuing to work full-time, part-time or casually.

 

Tips

You are only able to withdraw between 4% and 10% of your transition to retirement balance each financial year. You are unable to make lump sum withdrawals unless you meet certain conditions of release, such as retirement.
Up to age 60, the taxable amount of your income from a TTR pension is taxed at your personal income tax rate, less a 15% tax offset. Then, once you turn 60, the income you receive from your TTR pension is completely tax-free.
While the tax treatment of income you receive from a TTR pension has not changed, the tax treatment of investment earnings on super fund assets that support TTR pensions changed on 1 July 2017.

Before 1 July 2017
Investment earnings on super fund assets that supported a TTR income stream were previously tax free.

After 1 July 2017
Earnings on fund assets supporting a TTR income stream are now subject to the same maximum 15% tax rate that applies to super accumulation funds.

The ability to commence a TTR income stream may present you with some useful opportunities.
For example, you could either work less, or work the same hours while sacrificing some of your salary into super. In both cases, you can use your TTR income stream to supplement any reduction in your take-home pay.

 

Traps

There are a number of things to consider, particularly when it comes to weighing up your circumstances and assessing any potential tax implications.

• Talking to your super fund, as not all funds accommodate TTR income streams
• Figuring out if you want to reduce your work hours, or work full-time and salary sacrifice
• Thinking about your income sources and calculating your income needs
• Finding out what your government entitlements are, as there may be implications
• If you have life insurance through your super fund, checking it won’t be affected.

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