A Transition to Retirement (TTR) income stream allows you to draw a pension from your super while still working — once you’ve reached your preservation age. It was designed to help older workers reduce their working hours while supplementing their income from super. As a strategy, TTR can also be used to boost your super balance and reduce tax without reducing work hours at all.
How a TTR Income Stream Works
- You reach your preservation age (60 for most Australians)
- You open a TTR income stream from your super fund — transferring a portion of your accumulation balance into a pension account
- You continue working and receiving your salary
- You draw from the TTR pension — between 4% and 10% of your balance each year (the 10% cap distinguishes TTR from full retirement pension, which has no maximum)
- Your employer continues making SG contributions and any salary sacrifice into your accumulation account
The Classic TTR Tax Strategy
Before 2017, TTR pension earnings were tax-free (0%), making the TTR strategy very attractive for anyone over preservation age. Since 1 July 2017, TTR pension account earnings are taxed at 15% (same as accumulation phase) — not 0% as previously.
This change significantly reduced the tax benefit of TTR for some users. The strategy still provides benefits in some situations, but the pure “tax arbitrage” opportunity is reduced.
When TTR Still Provides Benefit
Scenario: Salary sacrifice boosting
- Start a TTR income stream — draw pension payments to replace some take-home pay
- Increase salary sacrifice contributions by the same amount — boosting your concessional contributions, reducing income tax
- Net result: Same take-home pay, but more money going into super (from sacrificed salary) taxed at 15% instead of your marginal rate
- Your super balance grows faster due to the arbitrage between your marginal rate and 15%
This works best for those in the 34.5%+ tax brackets. The tax saving on salary sacrifice (19.5 cents per dollar at 34.5%) minus the 15% TTR pension earnings tax creates a net benefit.
Scenario: Reducing work hours
As originally intended — reduce to part-time, use TTR pension to top up income to previous level. Income is tax-free at age 60+ from a TTR pension.
Tax Treatment of TTR Pension Payments
| Age | Tax on TTR pension income |
|---|---|
| Preservation age to 59 | Taxable — included in assessable income, with 15% tax offset |
| 60 and over | Tax-free |
At age 60+, TTR pension payments are tax-free — a significant benefit even with the 15% earnings tax inside the TTR account.
TTR Limitations
- Maximum drawdown capped at 10% per year (unlike a retirement pension, which has no maximum)
- TTR earnings taxed at 15% (since July 2017) — not tax-free as in retirement pension phase
- Cannot make lump sum withdrawals from a TTR pension (income stream payments only — no commutation in most cases until you meet a full condition of release)
- Must remain within the 4–10% drawdown band
Converting TTR to Retirement Phase
Once you meet a full condition of release (e.g., you retire after age 60, or reach age 65), your TTR income stream automatically converts to a retirement phase pension — at which point:
- The 10% maximum drawdown is removed
- Earnings become tax-free (0%)
- The Transfer Balance Cap rules apply
Is TTR Still Worth It in 2026?
TTR is most beneficial for:
- Those aged 60–65 in the 34.5%+ tax bracket who want to boost super via salary sacrifice
- Those who want to reduce work hours while maintaining income
- People approaching 65 who want a “bridge” to full retirement
It is less beneficial than pre-2017 due to the loss of the 0% earnings tax. However, the income tax-free status of payments after age 60 remains a meaningful advantage.
Related Articles
- Preservation Age Australia
- Account-Based Pension Australia
- Salary Sacrifice Super Australia
- Retirement Investing hub
Frequently Asked Questions
Can I start a TTR at 55? Your preservation age must be 55 to start a TTR at 55. Only those born before 1 July 1960 have a preservation age of 55. Most working Australians have a preservation age of 60.
Can I still work full-time on a TTR? Yes — a TTR does not require you to reduce your work hours. Many Australians use a TTR strategy purely to restructure salary sacrifice and pension income for tax efficiency while working full-time.
What happens to my TTR if I retire? When you retire (meeting a full condition of release), your TTR income stream converts to a standard retirement pension — losing the 10% cap restriction and earning 0% tax on earnings. Notify your super fund when you retire.
This article provides general financial information only. TTR strategies involve complex interactions between super, tax, and income. For advice tailored to your situation, speak with a licensed financial adviser through the ASIC financial advisers register or MoneySmart.