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Transition To Retirement Pension

A transition to retirement pension (TTRP) is a type of account based pension that a member can receive if they have reached their preservation age and are still working.
This type of pension is the similar to an account based pension except under the transition to retirement rules:

  • You cannot take your benefits as a lump sum cash payment while you are still working. You must take your super benefits as regular payments.
  • No more than 10% of the account balance, as at the start of the financial year, may be paid each year.
Tax on transition to retirement income streams
Transition to retirement income streams are taxed in the same way as other income streams.
That means:
  • if you've reached your preservation age and are less than 60 years old, the taxable part of your income stream will be taxed at your marginal tax rate. If your income stream is paid from a taxed source, you will also receive a tax offset equal to 15% of the taxable part of the income stream, and
  • once you turn 60, your super income from a taxed source will be tax-free.

Should I commence a TTRP?
If you are over 60 and still working a TTRP is the perfect investment vehicle from a taxation point of view. Your super’s investments earnings and capital growth will be tax free as well as the pension drawn. In addition, you can reduce your personal tax by salary sacrificing. This is because the salary you sacrifice to put in super will only be taxed at 15% within the super fund, saving you from paying tax at your individual tax rate which may be as high as 46.5%.

For members aged 55 to 59 a TTRP combined with salary sacrificing will not be as effective because the pension drawn will be taxed at your personal tax rate (less 15% pension offset). However, overall it can still produce valuable tax savings.

For a tax analysis of the implications a TTRP will have on you please contact us.

TTRP Setup
JustSMSF can setup a transition to retirement pension on your behalf. A TTRP is appropriate if you have reached your preservation age and are still working. Please contact us to discuss.